AQA A-level Business Formulas

Question 1

total costs =

Answer 1

fixed costs + variable costs

Question 2

profit =

Answer 2

total revenue - total costs OR total contribution - fixed costs

Question 3

variable costs =

Answer 3

variable cost per unit x number of units sold

Question 4

total revenue (sales revenue / turnover) =

Answer 4

selling price per unit x number of units sold

Question 5

Market capitalisation of a business =

Answer 5

Number of issued shares x current share price

Question 6

Expected value of a decision with two possible outcomes - A&B =

Answer 6

(Pay-off of A x probability of A) + (pay-off of B x probability of B)

Question 7

In a decision tree net gain =

Answer 7

Expected value - initial cost of decision

Question 8

Market size (volume) =

Answer 8

Is the quantity of goods and services produced in a particular market over a period of time (usually one year)

Question 9

Market size (value) =

Answer 9

Is the total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time (usually one year)

Question 10

Sales volume =

Answer 10

Is the quantity of goods and services produced by a particular business over a period of time (usually one year)

Question 11

Sales value =

Answer 11

Is the total sales revenue of a particular business over a period of time usually 1 year

Question 12

Market growth (%) in year ‘X’ =

Answer 12

(Change in size of the market between year (X-1) and year X / size of the market in year (X-1)) x 100

Question 13

Sales growth (%) in year ‘X’ =

Answer 13

(Change in sales of product or business between year (X-1) and year X / sales of product or business in year (X-1)) x 100

Question 14

Market share % =

Answer 14

(Sales of one product or brand or business / total sales in the market) x 100

Question 15

Price elasticity of demand =

Answer 15

(Percentage change in quality demanded / percentage change in price) x 100

Question 16

Income elasticity of demand =

Answer 16

(Percentage change in quality demanded / percentage change in income) x 100

Question 17

Added value (value added) =

Answer 17

Sales revenue - cost of bought in goods and services

Question 18

Labour productivity =

Answer 18

Output per time period / number of employees

Question 19

Unit costs (average costs) =

Answer 19

Total costs of production / number of units of output produced

Question 20

Capacity utilisation (%) =

Answer 20

(Actual output in a given time period / maximum possible output in a given time period) x 100

Question 21

Return on investment (%) =

Answer 21

((Final value of investment -initial value of investment (£)) / cost of the investment (£) ) x 100

Question 22

Gross profit =

Answer 22

Sales revenue - cost of sales

Question 23

Operating profit =

Answer 23

Sales revenue - cost of sales - operating expenses

Question 24

Profit for year =

Answer 24

Operating profit + profit from other activities - net finance costs - tax

Question 25

Variance =

Answer 25

The difference between an actual and a budgeted figure

Question 26

Contribution per unit =

Answer 26

Selling price - variable cost per unit

Question 27

Total contribution (1) =

Answer 27

Contribution per unit x units produced or sold

Question 28

Total contribution (2) =

Answer 28

Total revenue - total variable costs

Question 29

Break even output =

Answer 29

Fixed costs / contribution per unit

Question 30

Margin of safety =

Answer 30

Actual level of output - break even level of output

Question 31

Gross profit margin (%) =

Answer 31

(Gross profit / sales revenue) x 100

Question 32

Operating profit margin (%) =

Answer 32

(Operating profit / sales revenue) x 100

Question 33

Profit for the year margin (%) =

Answer 33

(Profit for the year / sales revenue) x 100

Question 34

Labour turnover (%) =

Answer 34

(Number of staff leaving during the year / average number of staff employed by the business during the year) x 100

Question 35

Employee retention rate (%) for a particular time period =

Answer 35

(Number of staff leaving during the year / average number of staff employed by the business during the year) x 100

Question 36

Employee costs as a percentage of turnover =

Answer 36

(Employee costs / sales turnover) x 100

Question 37

Labour cost per unit =

Answer 37

Labour costs / units of output

Question 38

Return on capital employed (ROCE) (%) =

Answer 38

(Operating profit / total equity + non current liabilities) x 100

Question 39

Capital employed =

Answer 39

Total equity + non current liabilities

Question 40

Current ratio =

Answer 40

Current asserts / current liabilities

Question 41

Gearing (%) =

Answer 41

(Non current liabilities / total equity + non current liabilities) x 100

Question 42

Payables days (creditors) =

Answer 42

(Payables / cost of sales) x 365

Question 43

Receivables days (debtors) =

Answer 43

(Receivables / sales revenue) x 365

Question 44

Inventory turnover =

Answer 44

Cost of goods sold / average inventories held

Question 45

Average rate of return (%) =

Answer 45

(Net return from project (£) or number of years / initial cost of project (£)) x 100