Business Equations Flashcards
Revenue (sales turnover)
Revenue = Selling price per unit x Number of unites sold
Variable costs
Variable cost is = Variable cost per unit x Number of units sold
Total costs
Total costs = Fixed costs + Variable costs
Profit
Profit = total revenue - total costs OR Profit = total contribution - fixed costs
Market capitalisation of a business
Market capitalisation of a business = Number of issued shares x current share price
Expected value of a decision with two possible outcomes
Expected value of a decision with two possible outcomes e.g. A & B = [pay-off of A x probability of A] + [Pay off of B x probability of B]
Net gain
Net gain = Expected value - Initial cost of decision
Market growth %
Market growth = Change in the size of the market over a period/ original side of the market x 100
Market share %
Market share = sales of one product OR rand OR business / Total sales in the market x 100
Added value
Added value = sales revenue - costs of brought in goods and services
Labour productivity
Labour productivity = Output over a time period / Number of employees
Unit costs (average costs)
Unit costs = total costs / number of units of output x 100
Capacity utilisation %
Capacity utilisation = Actual output / Maximum possible output x 100
Return on investment
Profit from the investment b cost of the investment x 100
Gross profit
Gross profit = Revenue - cost of sales
Profit from operations
Profit from operations = operating profit = gross profit - operating Expenses
Profit for the year
Profit for the year = operating profit + profit from other activities - net finance costs - tax
Gross profit margin %
Gross profit = gross profit / revenue x 100
Operating profit margin
Operating profit / revenue x 100
Operating profit margin %
Operating profit / revenue x 100
Profit for the year margin %
Profit for the year / revenue x 10p
Variance
Budgeted figure - actual figure
Contribution per unit
Contribution per unit = selling price - variable costs
Total contribution
Total contribution = contribution per unit x units sold
Break even output
Break even output = fixed costs / contribution per unit
Margin of safety
Margin of safety = actual level of output - Break even level of output
Labour turnover %
Labour turnover = number of staff leaving / number of staff employed by the business x 100
Employee retention rate % for a particular time period
Employee retention rate for a particular time period = number of employees who remained with the business for the whole period of time / number of employees at start of the time period x 100
Employee costs as a percentage of turnover
Employee costs a a percentage of turnover = employee costs / turnover x 100
Labour cost per unit
Labour costs / units of output
Return on capital employed %
Return on capital employed = operating profit / total equity + non current liabilities x 100
Current ratio
Current ration= current assets / current liabilities x 100
Payables days
Payables days = payables cost of sales x 365
Receivables days
Receivables days = receivables / revenue x 365
Inventory turnover
Inventory turnover = cost of sales / average inventories held
Average rate of return %
Average rate of return = average annual return sp/ initial cost of project x 100
