Vrooms Formula
Motivation=(E×I×V)
Expectancy × Instrumentality × Valence
Vrooms formula elements
E I V
E- Expectancy
I-Instrumentality
V-Valance
What is valance
The value an individual places on a potential outcome or reward, which is based on their personal needs, goals, and preferences
Total Revenue
Selling price per unit × qty sold
Cost of sales
COS= Opening stock + purchases - closing stock
Gross profit
GP= Sales revenue - cost of sales
Retained profit
Profit retained by business
Total capital employed
TCE= Non current liabilities + shareholder equity + retained earnings
Return on capital employed
ROCE= Profit before tax / total capital employed × 100 (an a percentage)
Profit Margin Ratio
Net profit/ Sales revenue × 100
Current Ratio
Current Assets/ Current Liabilities
Acid test (quick) ratio
plus desired range
(Current Assets - Stock) / Current Liabilities
Ideally between 1:1 to 1:1.5
Pay back period
PBP = Cost of investment/ Contribution per month
Average rate of return (% per year)
ARR =(total returns- capital cost) ÷ years of use / capital cost × 100
Labor turnover
number of employees leaving in 1 year / average number of people employed
Current assets
Cash, debtors, stock
Non current assets
Property plant and equipment + accumulated depreciation
Non-current liabilities
Borrowings (long-term)
Current liabilities
Bank overdrafts, trade creditors, other short-term loans
Net assets rule for statement of financial position
Net asset= Total equity
Total assets rule for statement of financial position
Total liabilities + equity = Total assets
Statement of financial position titles
Statement of fianancial position as it x
Non current assets
Total depreciation ()
subtotal
Current assets
subtotal
total assets
Current liabilities
subtotal
Non current
subtotal
Total liabilities
Net Assets
Equities
Total equity
Total equity rule for statement of financial position
Total equity = Net assets
Statement of profit or loss
Business name for year ended date
Sales revenue
COS value in brackets ()
Gross profit/surplus
Expenses ()
Profit before interest and tax
Interest ()
Profit before tax
Tax ()
Profit for period
Dividends ()
Retained Profit
