business formulae

Question 1

current ratio

Answer 1

current assets / current liabilities

Question 2

liquid assets

Answer 2

current assets - inventories (stock)

Question 3

acid test ratio

Answer 3

liquid assets / current liabilities

Question 4

asset turnover

Answer 4

revenue / net assets

Question 5

inventory turnover

Answer 5

cost of sales / average inventories held

Question 6

market capitalisation

Answer 6

no. of issued shares x current share price

Question 7

dividend yield

Answer 7

dividend per share (pence) / share price (pence) x 100

Question 8

market growth

Answer 8

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

Question 9

market share

Answer 9

sales of business / total sales in the market x 100

Question 10

PED

Answer 10

% change in quantity demanded / % change in price

Question 11

YED

Answer 11

% change in quantity demanded / % change in income

Question 12

revenue (sales or turnover)

Answer 12

selling price per unit x number of units sold

Question 13

total variable costs

Answer 13

V.C / unit x no. of units sold

Question 14

contribution per unit

Answer 14

selling price - V.C per unit

Question 15

total contribution

Answer 15

cont per unit x units sold
OR
total revenue - total variable costs

Question 16

break even output

Answer 16

fixed costs / cont per unit

Question 17

margin of safety

Answer 17

actual level out output - break even level of output

Question 18

payabale days

Answer 18

payables / cost of sales x 365

Question 19

receivable days

Answer 19

receivables / revenue x 365

Question 20

current ratio

Answer 20

current assets / current liabilities

Question 21

acid test ratio

Answer 21

current assets - inventory / current liabilities

Question 22

profit

Answer 22

total contribution - fixed costs

Question 23

gross profit

Answer 23

revenue - cost of sales

Question 24

operating profit

Answer 24

gross profit - operating expenses

Question 25

profit for the year

Answer 25

gross profit - operating expenses

Question 26

net profit

Answer 26

gross profit - expenses

Question 27

profit for the year

Answer 27

Operating profit + Profit from other activities − Net finance costs – Tax

Question 28

gross profit margin (%)

Answer 28

gross profit / revenue x 100

Question 29

operating profit margin (%)

Answer 29

operating profit / revenue x 100

Question 30

net profit margin (%)

Answer 30

net profit / revenue x 100

Question 31

profit for the year margin (%)

Answer 31

profit for the year / revenue x 100

Question 32

variance

Answer 32

budgeted figure - actual figure

Question 33

ROCE (%)

Answer 33

operating profit / total equity + non current liabilities x 100

Question 34

ROCE (%)

Answer 34

total equity + non current liabilities = capital employed

Question 35

gearing

Answer 35

non current liabilities / total equity + non current liabilities x 100

Question 36

employee productivity

Answer 36

output over a time period / number of employees

Question 37

capacity utilisation

Answer 37

actual output / maximum possible output x 100

Question 38

inventory turnover

Answer 38

cost of sales / average inventories held