business formulas

Question 1

this deck rule

Answer 1

somthing above somthing with no line means divide

x100 or somthing on the next few lines means do after

Question 2

Inventory turnover =

Answer 2

Cost of sales
Average inventories held

Question 3

Receivables days =

Answer 3

Receivables
Revenue

× 365

Question 4

Payables days =

Answer 4

Payables
Cost of sales

× 365

Question 5

Average rate of return (%) =

Answer 5

Average annual return (£)
Initial cost of project (£)

x100

Question 6

Gearing (%) =

Answer 6

Non-current liabilities
Total equity + non-current liabilities

×100

Where total equity + non-current liabilities = capital employed

Question 7

Current ratio =

Answer 7

Current assets
Current liabilities

Question 8

Return on capital employed (ROCE)(%) =

Answer 8

Operating profit
Total equity + non-current liabilities

× 100

Where total equity + non-current liabilities = capital employed

Question 9

Labour cost per unit =

Answer 9

Labour costs
Units of output

Question 10

Employee costs as percentage of turnover =

Answer 10

Employee costs
Turnover

× 100

Question 11

Employee retention rate (%) for a particular time period =

Answer 11

Number of employees who remained with the business
for the whole period of time
Number of employees at start of the time period

x100

Question 12

Labour turnover (%) =

Answer 12

Number of staff leaving
Number of staff employed by the business

× 100

Question 13

Break-even output =

Answer 13

Fixed costs
Contribution per unit

Margin of safety =
Actual level of output − Break-even level of output

Question 14

Total contribution =

Answer 14

Contribution per unit × Units sold

or

Total revenue − Total variable costs

Question 15

Contribution per unit =

Answer 15

Selling price − Variable costs per unit

Question 16

Variance =

Answer 16

Budgeted figure – actual figure

Question 17

Gross profit margin (%) =

Answer 17

Gross profit
Revenue

× 100

Question 18

Profit from operations margin = Operating profit margin (%) =

Answer 18

Operating profit
Revenue

× 100

Question 19

Profit for year margin (%) =

Answer 19

Profit for year
Revenue × 100

Question 20

Gross Profit =

Answer 20

Revenue − Cost of Sales

Question 21

Profit from Operations = Operating profit =

Answer 21

Gross profit − Operating Expenses

Question 22

Profit for year =

Answer 22

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

Question 23

Return on investment (%) =

Answer 23

Profit from the investment (£)
Cost of the investment (£)

× 100

Question 24

Capacity utilisation (%) =

Answer 24

Actual output
Maximum possible output

× 100

Question 25

Unit costs (average costs)=

Answer 25

Total costs
Number of units of output

Question 26

Labour productivity =

Answer 26

Output over a time period
Number of employees

Question 27

Added value =

Answer 27

Sales revenue − costs of bought-in goods and services

Question 28

Market share (%) =

Answer 28

Sales of one product OR brand OR business
Total sales in the market

× 100

Question 29

Market growth (%) =

Answer 29

Change in the size of the market over a period
Original size of the market

× 100

Question 30

Net gain =

Answer 30

Expected value − Initial cost of decision

Question 31

Expected value of a decision with two possible outcomes eg. A & B =

Answer 31

A & B =
(Pay-off of A × probability of A) + (Pay-off of B × probability of B)

Question 32

Market capitalisation of a business =

Answer 32

Number of issued shares × Current share price

Question 33

Revenue (Sales or Turnover) =

Answer 33

Selling price per unit × Number of units sold

Question 34

Variable costs (Total variable costs) =

Answer 34

Variable cost per unit × Number of units sold

Question 35

Total costs =

Answer 35

Fixed costs + Variable costs

Question 36

Profit =

Answer 36

Total revenue − Total costs OR
Total contribution − Fixed costs