Weekly Lesson Two

Business & Finance Basics  |  ACCF Batch 2

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Business & Finance Glossary

Key Business & Finance Formulas

1. Gross Profit Margin

Gross Profit Margin (%) = (Gross Profit / Revenue) Γ— 100

Measures the percentage of revenue remaining after deducting cost of goods sold.

2. Return on Investment (ROI)

ROI (%) = (Net Gain / Cost of Investment) Γ— 100

Evaluates the efficiency or profitability of an investment.

3. Break-Even Point (Units)

Break-Even Units = Fixed Costs / (Price per Unit βˆ’ Variable Cost per Unit)

The number of units that must be sold to cover all costs with zero profit or loss.

4. Net Present Value (NPV)

NPV = Ξ£ [Cash Flow_t / (1 + r)^t] βˆ’ Initial Investment

Simple two-period approximation: enter Year 1 and Year 2 cash flows.

5. Working Capital

Working Capital = Current Assets βˆ’ Current Liabilities

Indicates the short-term liquidity and operational efficiency of a business.

6. Debt-to-Equity Ratio

Debt-to-Equity Ratio = Total Debt / Total Equity

Measures the financial leverage of a company; higher values indicate greater debt reliance.

Excel for Business & Finance

Calculating Gross Profit Margin

Assume Revenue is in B2 and COGS is in C2:

=((B2-C2)/B2)*100

Formats the result as a percentage margin. Drag down for multiple rows.

ROI Calculation

Net Gain in D2, Investment Cost in E2:

=(D2/E2)*100

Returns ROI as a percentage. Use TEXT(result,"0.00")&"%" for formatted display.

NPV Function

Discount rate in A1, cash flows in B2:B6, initial investment in C1:

=NPV(A1/100,B2:B6)-C1

Excel's NPV function discounts each cash flow. Subtract the initial investment separately since it occurs at time zero.

Break-Even Analysis

Fixed costs in A2, price per unit in B2, variable cost per unit in C2:

=A2/(B2-C2)

Returns the number of units needed to break even. Round up with =CEILING(A2/(B2-C2),1).

Conditional Formatting for Positive/Negative Cash Flows

Select the cash flow column β†’ Home β†’ Conditional Formatting β†’ Highlight Cell Rules:

Greater than 0 β†’ Green fill
Less than 0    β†’ Red fill

Provides instant visual scanning of profitable versus loss-making periods.

SUMIF for Categorised Expenses

Category in column A, amounts in column B; total a specific category:

=SUMIF(A:A,"Operations",B:B)

Useful for budget tracking across departments such as Operations, HR, and Marketing.

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