Credit Management Equations Flashcards Preview

AAT Level 4 > Credit Management Equations > Flashcards

Flashcards in Credit Management Equations Deck (12)
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1
Q

What is the current ratio equation?

A

Current Assets / Current Liabilities

2
Q

What is the quick ratio or acid test ratio equation?

A

Current assets - inventory / Current Liabilities

3
Q

What is the receivable collection period equation?

A

receivables * 365 / Credit Sales

4
Q

What is the payable period equation?

A

payables * 365 / credit purchases

5
Q

What is the inventory holding period equation?

A

inventory * 365 / cost of sales

6
Q

What is the gross profit margin equation?

A

gross profit * 100 / revenue

7
Q

What is the operating profit margin equation?

A

profit from operations * 100 / revenue

8
Q

What is the net profit margin equation?

A

profit * 100 / revenue

9
Q

What is the interest cover equation?

A

profit from operations / finance costs

10
Q

What is the return on capital employed equation?

A

profit from operations * 100 / capital employed

11
Q

What is the gearing equation?

A

total debt * 100 / total debt + equity

DEBT DOES NOT INCLUDE TRADE PAYABLES JUST ITEMS WHICH BEAR INTEREST!

12
Q

What is the working capital cycle equation?

A

Inventory days + receivable days - payable days