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Calculating-Values-Using-Accounting-Ratios Igcse Edexcel

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Exam code:4AC1

Calculating values using accounting ratios

What information can I find using the gross profit percentage?

The formula for the gross profit percentage is $fraction numerator Gross space profit over denominator Revenue end fraction cross times 100$
- This is given as a percentage
You can use this percentage to find missing values

Gross profit	Multiply the revenue by the percentage
Revenue	Divide the gross profit by the percentage
Cost of sales	Subtract the gross profit from the revenue

Worked Example

The following information is given.

Revenue	$50 000
Gross profit percentage	60%

Calculate the value of the cost of sales.

Answer

Calculate the gross profit
- Multiply the revenue by the gross profit percentage
- 60% × $50 000 = $30 000
Calculate the cost of sales
- Subtract the gross profit from the revenue
  - $50 000 – $30 000 = $20 000

What information can I find using the mark-up?

The formula for mark-up is $fraction numerator Gross space profit over denominator Cost space of space sales end fraction cross times 100$
- This is given as a percentage
You can use this percentage to find missing values

Gross profit	Multiply the cost of sales by the percentage
Cost of sales	Divide the gross profit by the percentage
Revenue	Add together the gross profit and the cost of sales

Revenue = Cost of sales + (Mark-up percentage × Cost of sales)
If you know the mark-up and the revenue then you can also find the cost of sales
- Find the revenue as a percentage of the cost of sales
  - Add the mark-up to 100%
- Divide the revenue by this percentage to find the cost of sales

Worked Example

The following information is given.

Revenue	$126 000
Mark-up	20%

Calculate the value of the cost of sales.

Answer

Calculate the revenue as a percentage of the cost of sales
- Add the mark-up to 100%
- 20% + 100% = 120%
Divide the revenue by the percentage
- $126 000 ÷ 120% = $105 000

What information can I find using the profit for the year as a percentage of revenue?

The formula for the profit for the year as a percentage of revenue is $fraction numerator Profit space for space the space year over denominator Revenue end fraction cross times 100$
- This is given as a percentage
You can use this percentage to find missing values

Profit for the year	Multiply the revenue by the percentage
Revenue	Divide the profit for the year by the percentage

Worked Example

The following information is given.

Revenue	$50 000
Profit for the year as a

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