MGT 388

Terms

Done

• Period cost - All costs not directly associated to the manufacture of a product aka admin, finance and selling costs (Includes delivery)
• Asset - entities owned by the company predicted to produce profit
• • Current Assets - Assets to be spent within the next year
• • Non-current Assets - Assets that last longer than a year (land and machinery)
• Absorbtion costing - Calculating product cost including fixed manufacturing costs (Rent…) on top of direct costs (Material costs…)
• • Product costs - Direct costs from products plus indirect manufacting costs
• Variable costing
• • Product costs - All variable product costs (Direct costs + variable manufacturing overhead)
• Direct costs - a cost that can be directly associated to a produced object
• Prime cost - summation of all direct costs
• Indirect costs - costs that cannot be associated directly to a production object (Utilites, rent, office supplies)
• Accruals - revenue and expenses are recorded on purchase rather than based on cash flow
• Liquidity - (based on current ratio) a companys ability to pay for short term liabilities
• Solvency - (Gearing Ratio) a companies ability to pay for interest on loans and long term payments
• Profitability - (ROCE) a companies ability to make profit on item sales
• Fixed costs - costs that do not change based on revenue or products produced (rent…)
• Variable costs - costs that change based on production quantity (Sparky bill…)
• Audit - an official inspection of a companies accounts
• Contribution - The money leftover after variable costs are applied to revenue
• Liability - A cost owed by the company
• • Current-Liability - Liabilities owed currently aka subblier bills
• • Non-Current Liability - Liabilities owed long term aka loan payback
• Payback period - Time an investment takes to pay back its cost
• Net present value - Summation of profit made on an investment including compound interest

To-do

• Limited company
• Public limited company
• Statement of financial position
• Income statement
• Break-even point
• Margin of safety

Equations

Done

Return on Captial Investment

$ROCE=\frac{\textrm{Operating Profit}}{\textrm{Equity}+\textrm{Non-Current Liabilities}}$

Net asset turnover

$NAT=\frac{\textrm{Revenue}}{\textrm{Equity}+\textrm{Non-Current Liabilities}}$

Gross Profit Margin

$GPM=\frac{\textrm{Gross Profit}}{\textrm{Revenue}}$

Operating profit margin

$OPM=\frac{\textrm{Operating Profit}}{\textrm{Revenue}}$

Current Ratio

$CR=\frac{\textrm{Current Assets}}{\textrm{Current Liabilities}}$

Interest Cover

$IC=\frac{\textrm{Operating Profit}}{\textrm{Interest Payable}}$

Gearing

$G=\frac{\textrm{NonCurrent Liabilities}}{\textrm{Equity}}$

Quick Ratio

$QR=\frac{\textrm{Current Assets}-\textrm{Inventories}}{\textrm{Current Liabilities}}$

Inventory Days

$ID=\frac{\textrm{Inventories}}{\textrm{Gross Profit}}\cdot 365$

Trade Recievable days

$TRD=\frac{\textrm{Trade Revievables}}{\textrm{Revenue}}\cdot 365$

Trade Payable days

$TPD=\frac{\textrm{Trade Payables}}{\textrm{Cost of Sales}}\cdot 365$

Net present value

$NPV=\sum_{t=1}^{T_{end}}(\frac{\textrm{Cash Flow}}{(1+i)^{t}}) -\textrm{Initial Investment}$

Period cost

$PC=$Marketing$+$Selling$+$Admin$+$Interest

Asset turnover

$ATO=\frac{\textrm{Revenue}}{\textrm{Assets}}$

Payback Period

$\textrm{Expenses}=\textrm{Revenue}$

Contribution

$\textrm{Sale price} - \textrm{Variable costs}$

To-Do

Accounting rate of return

Break-even point

Margin of safety