business formulas

Question 1

current ratio

Answer 1

current assets divided by current liabilities

Question 2

gearing

Answer 2

non current liabilities divided by total equity + non current liabilities x100

Question 3

payables days

Answer 3

payables divided by cost of sales x365

Question 4

recievables days

Answer 4

recievables divided by revenue x365

Question 5

inventory turnover

Answer 5

cost of sales divided by average inventories held

Question 6

average rate of return

Answer 6

average annual retrun divided by initial cost of project x100

Question 7

revenue

Answer 7

selling price x number of units sold

Question 8

variable costs

Answer 8

variable cost per unit x number of units sold

Question 9

total costs

Answer 9

fixed costs + variable costs

Question 10

profit

Answer 10

total revenue - total costs

Question 11

market capitalisation

Answer 11

number of shares issued x current share price

Question 12

expected value of a decision with two possible outcomes

Answer 12

(pay off of A x probability of A) + (pay off of B x probability of B)

Question 13

net gain

Answer 13

expected value - initial cost of decision

Question 14

market growth

Answer 14

change in size if market over a period divided by original size of market x100

Question 15

market share

Answer 15

sales of one product or brand or business divided by total sales in the market x100

Question 16

added value

Answer 16

sales revenue - cost of bought in goods and services

Question 17

labour productivity

Answer 17

output over a time period divided by number of employees

Question 18

unit costs (average costs)

Answer 18

total costs divided by number of units of output

Question 19

capacity utilisation

Answer 19

actual output divided by maximum possible output x100

Question 20

return on investment

Answer 20

profit from the investment divided by cost of the investment x100

Question 21

gross profit

Answer 21

revenue - cost of sales

Question 22

profit from operations

Answer 22

operating profit= gross profit - operating expenses

Question 23

profit for the year

Answer 23

operating profit - tax

Question 24

gross profit margin

Answer 24

gross profit divided by revenue x100

Question 25

operating profit margin

Answer 25

operating profit divided by revenue x100

Question 26

profit for the year margin

Answer 26

profit for year divided by revenue x100

Question 27

variance

Answer 27

budgeted figure - actual figure

Question 28

contribution per unit

Answer 28

selling price - variable costs per unit

Question 29

break even output

Answer 29

fixed costs divided by selling price - variable costs

Question 30

margin of safety

Answer 30

actual level of output - break even level of output

Question 31

labour turnover

Answer 31

number of staff leaving divided by number of staff employed by the business x100

Question 32

employee retention rate

Answer 32

number of employees who remained in the business for a time period divided by number of employees at the start of the time period x100

Question 33

employee costs as a % of turnover

Answer 33

employee costs divided by turnover x100

Question 34

labour costs per unit

Answer 34

labour costs divided by units of output

Question 35

return on capital employed

Answer 35

operating profit divided by total equity + non current liabilities x100

Question 36

capital employed

Answer 36

total equity +non current liabilities