Business Formulas Flashcards
How do you calculate Revenue (Sales or Turnover)
Selling price per unit × Number of units sold
How do you calculate Variable costs (Total variable costs)
Variable cost per unit × Number of units sold
How do you calculate Total costs
Fixed costs + Variable costs
How do you calculate Profit
Total revenue − Total costs OR Total contribution − Fixed costs
How do you calculate Market capitalisation of a business
Number of issued shares × Current share price
How do you calculate Expected value of a decision with two possible outcomes
A & B = (Pay-off of A × probability of A) + (Pay-off of B × probability of B)
How do you calculate Net gain
Expected value − Initial cost of decision
How do you calculate Market growth (%)
Change in the size of the market over a period / Original size of the market × 100
How do you calculate Market share (%)
Sales of one product OR brand OR business /Total sales in the market × 100
How do you calculate Added value
Sales revenue − costs of bought-in goods and services
How do you calculate Labour productivity
Output over a time period / Number of employees
How do you calculate Unit costs (average costs)
Total costs / Number of units of output
How do you calculate Capacity utilisation (%)
Actual output / Maximum possible output × 100
How do you calculate Return on investment (%)
Profit from the investment (£) / Cost of the investment (£) × 100
How do you calculate Gross Profit
Revenue − Cost of Sales
How do you calculate Operating profit
Gross profit − Operating Expenses
How do you calculate Profit for year
Operating profit + Profit from other activities − Net finance costs − Tax
How do you calculate Gross profit margin (%)
Gross profit / Revenue × 100
How do you calculate Operating profit margin (%)
Operating profit / Revenue × 100
How do you calculate Profit for year margin (%)
Profit for year / Revenue × 100
How do you calculate Variance
Budgeted figure – actual figure
How do you calculate Contribution per unit
Selling price − Variable costs per unit
How do you calculate Total contribution
Contribution per unit × Units sold
OR
Total revenue − Total variable costs
How do you calculate Break-even output
Fixed costs / Contribution per unit
How do you calculate Margin of safety
Actual level of output − Break-even level of output
How do you calculate Labour turnover (%)
Number of staff leaving / Number of staff employed by the business × 100
How do you calculate 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 ×100
How do you calculate Employee costs as percentage of turnover
Employee costs / Turnover × 100
How do you calculate Labour cost per unit
Labour costs / Units of output
How do you calculate Return on capital employed (ROCE)(%)
Operating profit / Total equity + non-current liabilities × 100
total equity + non-current liabilities = capital employed
How do you calculate Current ratio
Current assets / Current liabilities
How do you calculate Gearing (%)
Non-current liabilities / Total equity + non-current liabilities ×100
total equity + non-current liabilities = capital employed
How do you calculate Payables days
Payables / Cost of sales × 365
How do you calculate Receivables days
Receivables / Revenue × 365
How do you calculate Inventory turnover
Cost of sales / Average inventories held
How do you calculate Average rate of return (%)
Average annual return (£) / Initial cost of project (£) × 100
How do you work out the Payback Period?
Work out the balance
Stop when the balance is less than net return the following year
Calculate the number of months:
Balance / Net return the following year x 12 months
How do you work out the ARR?
Step 1: Calculate the overall profit generated from the investment
Step 2: Divide by the number of years of the project to obtain the average annual profit/return
Step 3: Calculate what % this is of the initial investment
ARR (%) = Average annual return / initial cost of project (£) x100
How do you work out the NPV?
Step 1: Take each Net cash flow/ Return X the given discount factor
Step 2: Add up all the new Net present values
Step 3: Take away initial cost
= Investment NPV
