Business Equations

Question 1

What is the formula for revenue ?

Answer 1

Selling Price per Unit x Quantity Sold

Question 2

What is the formula for total variable costs ?

Answer 2

Variable cost per unit x Number of units sold

Question 3

What is the formula for total costs ?

Answer 3

Fixed costs + Variable costs

Question 4

What is one formula for Profit ?

Answer 4

Total Revenue - Total costs

Question 5

What is another formula for profit?

Answer 5

Total contribution - Fixed costs

Question 6

What is the formula for market capitalisation of a business?

Answer 6

Number of issued shares x current share price

Question 7

What is the formula for expected value of a decision with two payable outcomes?

Answer 7

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

Question 8

What is the formula for net gain?

Answer 8

Expected value - Initial cost of decision

Question 9

What is the formula for market growth?

Answer 9

Change in the size of the market over a period/ Original size of the market *100

Question 10

What is the formula for market share?

Answer 10

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

Question 11

What is the formula for added value?

Answer 11

Sales revenue - costs of bought-in goods and services

Question 12

What is the formula for labour productivity?

Answer 12

Output over a time period/ Number of employees

Question 13

What is the formula for unit/average costs?

Answer 13

Total costs/ Number of units of output

Question 14

What is the formula for capacity utilisation?

Answer 14

Actual output/ Maximum possible output * 100

Question 15

What is the formula for return of investment?

Answer 15

Profit from the investment/ Cost of the investment * 100

Question 16

What is the formula for gross profit?

Answer 16

Revenue - Cost of sales

Question 17

What is the formula for profit from operations/ operating profit?

Answer 17

Gross profit - operating expenses

Question 18

What is the formula for profit for the year?

Answer 18

Operating profit + Profit from other activities - Net finance cost - Tax

Question 19

What is the formula for gross profit margin ?

Answer 19

Gross Profit/ Revenue *100

Question 20

What is the formula for operating profit margin?

Answer 20

OP/ Revenue *100

Question 21

What is the formula for profit of the year margin?

Answer 21

PFY/ REV * 100

Question 22

What is the formula for variance?

Answer 22

Budgeted figure - Actual figure

Question 23

What is the formula for contribution per unit?

Answer 23

Selling Price - Variable costs per unit

Question 24

What is one formula for total contribution?

Answer 24

Contribution per unit x Units Sold

Question 25

What is another formula for total contribution?

Answer 25

Total revenue - Total variable costs

Question 26

What is the formula for break even?

Answer 26

Fixed Costs / Contribution Per Unit

Question 27

What is the formula for margin of safety

Answer 27

Actual output / Break even output

Question 28

What is the formula for labour turnover?

Answer 28

Number of staff leaving/ Number of staff employed by the business * 100

Question 29

What is the formula for employee costs as a % of turnover ?

Answer 29

Employee costs/ Turnover * 100

Question 30

What is the formula for ROCE?

Answer 30

Operating profit/ Total equity + Non Current liabilities* 100

Question 31

What is the formula for payable days?

Answer 31

Payables/ Cost of Sales x 365

Question 32

What is the formula for inventory turnover

Answer 32

Cost of sales/ Average inventories held

Question 33

What is the formula for average rate of return?

Answer 33

Average annual return/ Initial cost of project * 100

Question 34

What is the formula for PED?

Answer 34

%change in quantity demanded/ %change in price

Question 35

What is the formula for YED?

Answer 35

%change in quantity demanded/ %change in income

Question 37

What is the formula for interest?

Answer 37

Interest rate x Size of loan