ALL BUSINESS EQUATIONS

Question 1

Revenue =

Answer 1

Selling price per unit x number of units sold

Question 2

Variable costs =

Answer 2

Variable cost per unit x number of units sold

Question 3

Total costs =

Answer 3

fixed costs + variable costs

Question 3

Profit =

Answer 3

total revenue - total cost

Question 4

Market Capitalisation =

Answer 4

Number of issued shares x current share price

Question 5

Net gain =

Answer 5

Expected value - initial cost of decision

Question 6

Market growth (%) =

Answer 6

Change in the size of the market over a period / original size of the market x 100

Question 7

Market share (%) =

Answer 7

Sales of one product OR brand OR business / Total sales in the market x 100

Question 8

Added value =

Answer 8

Sales revenue - costs of bought in goods and services

Question 9

Labour productivity =

Answer 9

Output per time period / number of employees

Question 10

Capacity utilisation (%) =

Answer 10

(actual output/maximum possible output) x100

Question 10

Unit costs =

Answer 10

total cost / units of output

Question 11

Return on investment (%) =

Answer 11

Profit from the investment (£) / Cost of the investment (£) × 100

Question 12

Gross profit margin (%) =

Answer 12

Gross profit/sales revenue x 100

Question 12

Gross profit =

Answer 12

revenue - cost of goods sold

Question 13

Operating profit =

Answer 13

gross profit - operating expenses

Question 14

Net profit =

Answer 14

operating profit + gross profit - net finance costs + tax

Question 15

Profit for year margin =

Answer 15

Profit for the year / sales revenue x 100

Question 15

Operating profit margin =

Answer 15

Operating profit / sales revenue x 100

Question 16

Variance =

Answer 16

budgeted figure - actual figure

Question 17

Contribution per unit =

Answer 17

Selling price - variable costs per unit

Question 18

Break-even output =

Answer 18

Fixed costs / contribution per unit

Question 19

Margin of safety =

Answer 19

Actual output - break even output

Question 20

Labour turnover (%) =

Answer 20

(Number of staff leaving / number of staff employed) x 100

Question 21

Employee retention rate (%) =

Answer 21

No. of employees at end of period - number of leavers / No. of employees at end of period x 100

Question 22

Employee costs as percentage of turnover =

Answer 22

Employee costs / sales turnover x 100

Question 23

Labour costs per unit =

Answer 23

Labour costs / units of output

Question 23

Return on capital employed (%) =

Answer 23

operating profit / total equity + non current liabilities x 100

Question 24

Current ratio =

Answer 24

current assets / current liabilities

Question 25

Gearing (%) =

Answer 25

Non current liabilities / (total equity + non current liabilities) x100

Question 26

Payables days =

Answer 26

(Payables / cost of sales) x 365

Question 27

Receivables days =

Answer 27

Receivables / revenue x 365

Question 28

Inventory turnover =

Answer 28

cost of sales / average inventories held

Question 29

Average rate of return (%) =

Answer 29

Average annual return (£) / Initial cost of project (£) × 100