AQA business AL - formulas

Question 1

profit

Answer 1

profit = Total revenue - Total costs

Question 2

revenue / turnover

Answer 2

revenue = selling price x number of units sold

Question 3

gross profit

Answer 3

sales rev - cost of sales (direct costs)

Question 4

operating profit

Answer 4

gross profit - operating costs (indirect costs)

Question 5

gross profit margin & operating profit margin

• literal definitions

Answer 5

gross profit/ sales rev x 100 ,, operating profit/ sales rev x 100

• for every £1 in sales the business makes x amount of gross/ operating profit

Question 6

profit for the year / net profit

Answer 6

operating profit +/ - interest and minus debts e.g. tax

Question 7

break even point

Answer 7

total fixed costs/ contribution per unit

Question 8

contribution per unit

Answer 8

selling price - variable cost per unit

Question 9

labour productivity

Answer 9

output over a specific period / number of employees

Question 10

income elasticity

Answer 10

% change in quantity demanded / % of change in income

Question 11

price elasticity

Answer 11

% change in quantity demanded / % change in price

Question 12

output

Answer 12

average productivity per employee x number of employees

Question 13

market capitalisation

Answer 13

number of shares owned by shareholders x share price
- measures total market value of issued share capital of the company

Question 14

market share

Answer 14

sales rev of a company / sales rev of entire market x 100

Question 15

labour turnover

Answer 15

number of staff leaving per year / average number of staff x 100

Question 16

labour retention

Answer 16

number of staff staying per year / average number of staff x 100

Question 17

capacity utilisation

Answer 17

current output/ max output x 100

Question 18

return on investment

Answer 18

investment return / original investment

Question 19

added value or profit per unit

Answer 19

selling price of product - total cost to create product

Question 20

cost per unit

Answer 20

total cost / number of units produced

Question 21

capital employed

Answer 21

total equity + NCL

Question 22

gearing ratio

Answer 22

Ncl/ capital employed x 100

above 50% highly geared,, below 25% lowly geared

Question 23

current ratio

Answer 23

CA/ CL
= x:1
- preferred ratio is between 1.5:1 to 2:1

Question 24

working capital

Answer 24

CA - CL

Question 25

inventory (stock) turnover

Answer 25

cost of goods sold (over a year)/ average inventory held
- the higher the better
- the number of times a year you sell of all your stock

Question 26

receivables days

Answer 26

receivables/ revenue x 365
- the lower the better (preferably lower than payables days)
- how long it takes to receive money from customers

Question 27

payables days

Answer 27

payables/ cost of sales x 365
- higher the better
- how long until business has to pay back suppliers

Question 28

ROCE - return on capital employed

Answer 28

operating profit/ capital employed x 100