FINANCIAL MANAGEMENT PART
FORMULAS
HC1
● Equity = Assets – liabilities
● Free cash flow = cash inflow (sales) - cash outflow (purchasing/using resources)
● Profit = income - costs (finance, machinery and labour, overheads, inputs)
● Relation free cash flow and profit;
Free cash flow = period profit after tax + depreciation - investments + disinvestments
—> first; profit before tax (sales - costs), than the tax
● ARR (average rate of return): average profit / average invested capital
● profit: free cash flow - annual deprecation
for average profit; divide through period (years)
● Average invested capital: investments + residual value / 2
● Payback period = free cash flow year1 + free cash flow year2 + …
● Compound interest rate = … x (1,0..)^…
● Discount rate = … / (1,0..)^…
● Net Present Value (NPV) = investment x free cash flow /
(WACC discount rate)^year
● Internal rate of return (IRR) = 0 = investment + free cash flow / (1+i)^year
HC2
● Working capital= current assets - current liabilities
● Economic order quantity= Q’ = √(2xDXF)/c
—> D; total demand per period, F; fixed ordering costs per order, c; carrying costs per unit per
period
● Reorder point = Sales per day x Order lead time
● Break even quantity point: q = F / (p - v)
—> p = selling price, F = fixed cost, v = variable cost per unit
● Contribution= fixed costs / amount above break even point
● Indifference point: Increase in total fixed costs / Reduction in variable costs
—> Annual turnover: units x unit selling price
HC3
● COST ACCOUNTING: the art and science of recording, classifying, summarising and
analysing costs to help management make prudent <voorzichtig> business decision
● Unit costs = fixed costs per unit + variable costs per unit
= (total fixed costs / normal output) + (total variable cost at (exp) actual output / (exp) actual
output)
● AC= profit/loss: transaction result (1) + output level variance (2)
(1) sales revenue (sales volume x selling price) - costs of goods sold (sales volume x full unit
costs)
(2) ((expected) actual output - normal output) x fixed costs per unit
● DC= profit/loss: transaction result (1) - fixed costs (2)
(1) sales revenue (sales volume x selling price) - VARIABLE costs of goods sold
Variance
● Budget = (standard Q x standard P) - (actual Q x actual P)
● Efficiency = (standard Q - actual Q) x standard P
● Price = (standard P - actual P) x actual Q
FORMULAS
HC1
● Equity = Assets – liabilities
● Free cash flow = cash inflow (sales) - cash outflow (purchasing/using resources)
● Profit = income - costs (finance, machinery and labour, overheads, inputs)
● Relation free cash flow and profit;
Free cash flow = period profit after tax + depreciation - investments + disinvestments
—> first; profit before tax (sales - costs), than the tax
● ARR (average rate of return): average profit / average invested capital
● profit: free cash flow - annual deprecation
for average profit; divide through period (years)
● Average invested capital: investments + residual value / 2
● Payback period = free cash flow year1 + free cash flow year2 + …
● Compound interest rate = … x (1,0..)^…
● Discount rate = … / (1,0..)^…
● Net Present Value (NPV) = investment x free cash flow /
(WACC discount rate)^year
● Internal rate of return (IRR) = 0 = investment + free cash flow / (1+i)^year
HC2
● Working capital= current assets - current liabilities
● Economic order quantity= Q’ = √(2xDXF)/c
—> D; total demand per period, F; fixed ordering costs per order, c; carrying costs per unit per
period
● Reorder point = Sales per day x Order lead time
● Break even quantity point: q = F / (p - v)
—> p = selling price, F = fixed cost, v = variable cost per unit
● Contribution= fixed costs / amount above break even point
● Indifference point: Increase in total fixed costs / Reduction in variable costs
—> Annual turnover: units x unit selling price
HC3
● COST ACCOUNTING: the art and science of recording, classifying, summarising and
analysing costs to help management make prudent <voorzichtig> business decision
● Unit costs = fixed costs per unit + variable costs per unit
= (total fixed costs / normal output) + (total variable cost at (exp) actual output / (exp) actual
output)
● AC= profit/loss: transaction result (1) + output level variance (2)
(1) sales revenue (sales volume x selling price) - costs of goods sold (sales volume x full unit
costs)
(2) ((expected) actual output - normal output) x fixed costs per unit
● DC= profit/loss: transaction result (1) - fixed costs (2)
(1) sales revenue (sales volume x selling price) - VARIABLE costs of goods sold
Variance
● Budget = (standard Q x standard P) - (actual Q x actual P)
● Efficiency = (standard Q - actual Q) x standard P
● Price = (standard P - actual P) x actual Q
