business formulas

Question 1

total contribution

Answer 1

total revenue - total variable costs

Question 2

contribution per unit

Answer 2

selling price (per unit) - variable costs (per unit)

Question 3

break even point

Answer 3

fixed costs / contributions per unit

Question 4

margin of safety

Answer 4

actual level of output - breakeven level of output

Question 5

market capitalisation

Answer 5

n.o issued shares x current share price

Question 6

labour productivity

Answer 6

output per time period / n.o employees

Question 7

Return on investment (%)

Answer 7

return on investment (£) / cost of investment (£) x 100

Question 8

gross profit

Answer 8

sales revenue - cost of sales

Question 9

gross profit margin (%)

Answer 9

gross profit / sales revenue x 100

Question 10

operating profit

Answer 10

gross profit - expenses

Question 11

operating profit margin (%)

Answer 11

operating profit / sales revenue x 100

Question 12

profit margin for the year (%)

Answer 12

profit for the year / sales revenue x 100

Question 13

percentage change in profit

Answer 13

current years profit - previous years / previous years profit x 100

Question 14

labour costs per unit

Answer 14

labour costs / units of output sold

Question 15

market growth (%)

Answer 15

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

Question 16

market share (%)

Answer 16

sales of one product or brand or business / total sales in the market

Question 17

variance

Answer 17

budgeted figure - actual figure

Question 18

current ratio

Answer 18

current assets / current liabilities

Question 19

gearing

Answer 19

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

Question 20

labour turnover

Answer 20

employees leaving / employees employed x 100

Question 21

total equity

Answer 21

assets - liabilities

Question 22

receivable days

Answer 22

receivables / revenue x 365

Question 23

payable days

Answer 23

payables / cost of sales x 365

Question 24

capacity utilisation

Answer 24

actual output / max output x 100

Question 25

inventory turnover

Answer 25

cost of sales / average inventories held

Question 26

unit costs

Answer 26

total costs / units of output

Question 27

variable costs

Answer 27

variable costs per unit x number of units sold

Question 28

added value

Answer 28

sales revenue - cost of brought in goods + services

Question 29

return on capital investment (ROCE)

Answer 29

operating profit / total equity + non-current liabilities x 100

Question 30

average rate of return (%)

Answer 30

average annual return / initial cost of project x 100