1. Finance —Formula Reminders
Profit
Gross profit = Turnover - Cost of sales
Net profit = Gross Profit - Fixed costs
Profitability
Profit margin = Profit X 100
Turnover
ROCE = Net Profit X 100
Capital employed
Total Assets = Current Assets + Fixed Assets
Liquidity
Current Ratio = Current Assets Acid Test Ratio = Current Assets –Stock
Current Liabilities Current Liabilities
Working Capital = Current Assets — Current Liabilities
Finance —Formula Reminders
Profit
Gross profit = Turnover - Cost of sales
Net profit = Gross Profit - Fixed costs
Profitability
Profit margin = Profit X 100
Turnover
ROCE = Net Profit X 100
Capital employed
Total Assets = Current Assets + Fixed Assets
Liquidity
Current Ratio = Current Assets Acid Test Ratio = Current Assets –Stock
Current Liabilities Current Liabilities
Working Capital = Current Assets — Current Liabilities

2. Finance —Key Terms
• Turnover – The Total value of money received from sales within a trading period. Also known as sales reve-
nue
• Cost of Sales – How much it costs the business to produce the goods they sell. Also known as costs of
goods sold.
• Costs – The amounts that a business has to pay in order to keep trading. Fixed & Variable Costs.
• Current Assets – Something owned by a business that it does not expect to keep for more than 12 months
and can be turned in to cash quickly. E.g stock, cash in the bank
• Fixed Assets – Possessions which are owned by a business which are difficult to turn into cash. E.g build-
ings
• Total Assets — The total current and fixed assets. Everything a business owns or is owed.
• Current Liabilities – A debt that a business has not yet paid, but expect to pay within the next 12 months
• Capital Employed – A measure of a business’ assets which it can use to help it raise revenues. = Total As-
sets – Current Liabilities
• Working Capital – This is the day-to-day finance required for running a business. = Current Assets – Cur-
rent Liabilities.
• Gross Profit – What is left after the cost of sales has been subtracted from turnover. Overheads, inter-
est and tax have not been taken into account.
• Net profit – The profit made by a business AFTER all the trading expenses have been paid.
• Operating Profit – The profit made by a business in it’s ordinary trading activities. All the administrative
and selling expenses are subtracted from the Gross Profit.
• Current Ratio — This demonstrates how many assets there is to pay off liabilities. 1:1 is safe.
• Return on Capital Employed — (ROCE) Measures if money invested into a business has been used effec-
tively. A high % ROCE means that the money invested is being used effectively and profitably.
Finance —Key Terms
• Turnover – The Total value of money received from sales within a trading period. Also known as sales reve-
nue
• Cost of Sales – How much it costs the business to produce the goods they sell. Also known as costs of
goods sold.
• Costs – The amounts that a business has to pay in order to keep trading. Fixed & Variable Costs.
• Current Assets – Something owned by a business that it does not expect to keep for more than 12 months
and can be turned in to cash quickly. E.g stock, cash in the bank
• Fixed Assets – Possessions which are owned by a business which are difficult to turn into cash. E.g build-
ings
• Total Assets — The total current and fixed assets. Everything a business owns or is owed.
• Current Liabilities – A debt that a business has not yet paid, but expect to pay within the next 12 months
• Capital Employed – A measure of a business’ assets which it can use to help it raise revenues. = Total As-
sets – Current Liabilities
• Working Capital – This is the day-to-day finance required for running a business. = Current Assets – Cur-
rent Liabilities.
• Gross Profit – What is left after the cost of sales has been subtracted from turnover. Overheads, inter-
est and tax have not been taken into account.
• Net profit – The profit made by a business AFTER all the trading expenses have been paid.
• Operating Profit – The profit made by a business in it’s ordinary trading activities. All the administrative
and selling expenses are subtracted from the Gross Profit.
• Current Ratio — This demonstrates how many assets there is to pay off liabilities. 1:1 is safe.
• Return on Capital Employed — (ROCE) Measures if money invested into a business has been used effec-
tively. A high % ROCE means that the money invested is being used effectively and profitably.