Business Formulas

Question 1

Revenue

Answer 1

Selling price per unit x Number of Units Sold

Question 2

Variable Costs

Answer 2

Variable Costs per unit x number of units sold

Question 3

Total Costs

Answer 3

Fixed Costs + Variable Costs

Question 4

Profit

Answer 4

Total Revenue - Total Costs

Question 5

Market Capitalisation

Answer 5

Number of Shares Issued x Share Price

Question 6

Expected value of a decision with two possible outcomes

Answer 6

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

Question 7

Net Gain

Answer 7

Expected Value - Initial Cost of Decision

Question 8

Market Growth

Answer 8

(Change in size of the Market over a period / Original Size of market) x 100

Question 9

Market Share

Answer 9

(Sale of one product or brand or business/Total Sales in the Market) x 100

Question 10

Added Value

Answer 10

Sales Revenue - cost of brought-in goods and services

Question 11

Labour productivity

Answer 11

Output over a time period / number of employees

Question 12

Unit Costs

Answer 12

Total costs / Number of Units of Output

Question 13

Capacity Utilisation

Answer 13

(Actual Output / Maximum possible output) x 100

Question 14

Return on investment

Answer 14

(Profit from the investment / Cost of the investment) x 100

Question 15

Gross Profit

Answer 15

Revenue - cost of sales

Question 16

Profit from Operations (Operating profit)

Answer 16

Gross profit - Operating Expenses

Question 17

Profit for Year

Answer 17

Operating profit + Profit from other activities - Net finance costs - tax

Question 18

Gross Profit Margin

Answer 18

(Gross Profit / Revenue) x 100

Question 19

Operating Profit Margin

Answer 19

(Operating Profit / Revenue) x 100

Question 20

Profit for Year Margin

Answer 20

(Profit for Year / Revenue) x 100

Question 21

Variance

Answer 21

Budgeted figure - actual figure

Question 22

Contribution Per Unit

Answer 22

Selling Price - Variable Costs Per Unit

Question 23

Total Contribution 1

Answer 23

Contribution per Unit x Units sold

Question 24

Total Contribution 2

Answer 24

Total Revenue - Total Variable Costs

Question 25

Break-even output

Answer 25

Fixed costs / Contribution per unit

Question 26

Margin of Safety

Answer 26

Actual level of output - Break-even Level of Output

Question 27

Labour Turnover

Answer 27

(Number of Staff Leaving / Number of staff employed in the business) x 100

Question 28

Employee Retention Rate

Answer 28

(Number of Employees Who Stayed in a time period / Number Who started) x 100

Question 29

Employee costs as a percentage of turnover

Answer 29

(Employee costs / turnover) x 100

Question 30

Labour Costs per Unit

Answer 30

Employee Costs / Units of output

Question 31

ROCE

Answer 31

(Operating Profit / (Total Equity + Non-current liabilities)) x 100

Question 32

Current Ratio

Answer 32

Current Assets / Current Liabilities

Question 33

Gearing

Answer 33

(Non- Current Liabilities / Capital Employed) x 100

Question 34

Capital Employed

Answer 34

Total equity - non-current liabilities

Question 35

Payable Days

Answer 35

(Payables / Cost of Sales) x 365

Question 36

Receivable Days

Answer 36

(Receivables / Revenue) x 365

Question 37

Inventory Turnover

Answer 37

Cost of sales / Average inventories held