business formulas Flashcards
operating profit formula
gross profit - other operating expenses
operating profit margin formula
operating profit over revenue x 100
gross profit formula
revenue - cost of sales
gross profit margin
gross profit over revenue x 100
working capital /net assets formula
current assets - current liabilities
current ratio
current ratio = current assets over current liabilities
acid test ratio
current assets - inventory over
current liabilities
closing balance
net cash flow + opening balance = closing balance
break even point
fixed costs / contribution
capacity utilisation
existing output over maximum possible output x 100
labour productivity
total output over number of employees
revenue
quantity sold x price
margin of saftey
current level of output - break even point
contribution
selling price - variable cost per unit
average cost
(of each product)
total cost
over
output
total contribution
total revenue - total variable cost
net profit/profit of the year
total revenue - total expense
average rate of return
total average annual profit /initial cost
x 100
gearing formula
non current liabilities / capital employed x100
payback period
initial investment/ annual cash flow
ROCE formula (return on capital employed)
operating profit/capital employed x100
capital employed formula
total assets - current liabilities
net present value formula
net cash flow x discount factor
how to calculate absenteeism
number of staff absent for a period of time
over
total employees
how to calculate labour turnover
number of staff leaving in a year
over
average number of staff
contribution
selling price - variable cost per unit
What is the ideal acid test current ratio and what does it indicate
Ideal : 1.5-2:1
2:1 indicates For every £1 of current liabilities the business has £2 of assets to pay it off
what is the ideal gearing ratio and what does it indicate
25-50%
this shows us how much debt e.g bank loans is being used to finance a business
High gearing = higher debt
