business formulas

Question 1

revenue (sales or turnover)

Answer 1

selling price per unit x number of units sold

Question 2

variable costs (total variable costs)

Answer 2

variable costs per unit x number of units sold

Question 3

total costs

Answer 3

fixed costs + variable costs

Question 4

market growth %

Answer 4

change in the size of the market over a period ÷ total sales in the market

x 100

Question 4

profit

Answer 4

total revene - total costs

OR

total contributions - fixed costs

Question 5

market capitalisation of a business

Answer 5

number of issues shares x current share price

Question 5

expected value of a decision with 2 possible outcomes e.g A and B =

Answer 5

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

Question 6

net gain

Answer 6

expected value - initial cost of decision

Question 7

market share %

Answer 7

sales of one product OR brand OR business ÷ total sales in the market

x100

Question 8

added value

Answer 8

sales revenue - costs of bought in goods and services

Question 9

labour productivity

Answer 9

output over a time period ÷ number of employees

Question 10

unit costs (average costs )

Answer 10

total costs ÷ number of units output

Question 11

gross profit

Answer 11

revenue - cost of sales

Question 11

capacity utilisation %

Answer 11

actual output ÷ maximum possible outcome x 100

Question 12

return on investment %

Answer 12

profit from the investment ÷ cost of the investment

x100

Question 13

profit from operations

Answer 13

gross profit - operating expenses = operating profit

Question 14

profit for year

Answer 14

operating profit + profit from other actives. - net finance costs - tax

Question 14

gross profit margin %

Answer 14

gross profit ÷ revenue

x 100

Question 15

variance

Answer 15

budget figure - actual figure

Question 16

profit from operations margin = operating profit margin %

Answer 16

operating profit ÷ revenue

x100

Question 16

profit for the year margin %

Answer 16

profit for the year. ÷ revenue

x100

Question 17

contributions per unit

Answer 17

selling price. - variables costs per unit

Question 18

total contributions

Answer 18

contributions per unit x units sold

Question 19

total contribution

Answer 19

total revenue - total variable costs

Question 20

break even output =.

Answer 20

fixed costs ÷ contributions per unit

Question 21

margin of safety

Answer 21

actual level of output - break even level of output

Question 22

labour turnover %

Answer 22

number of staff leaving ÷ number of staff employed by the business

x100

Question 23

employee retention rate % of a particular time period

Answer 23

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

x100

Question 24

employee costs as a % of turnover

Answer 24

employee costs ÷ turnover

x100

Question 25

labour costs per unit

Answer 25

labour costs ÷ units of output

Question 26

return on capital employed roce %

Answer 26

operating profit ÷ total equity + non current liabilities

x100

Question 27

capital employed

Answer 27

total equity + non current liabilities

Question 28

current ratios

Answer 28

current assets ÷ current liabilities

Question 29

gearing %

Answer 29

non current liabilities ÷ total equity + non current liabilities

x100

Question 30

payable days

Answer 30

payables ÷ cost of sales

x365

Question 31

receivable days

Answer 31

receivable ÷ revenue

x365

Question 32

inventory turnover

Answer 32

cost of sales ÷ average inventories held

Question 33

average rate of return

Answer 33

average annual return ÷ initial cost of profit (all pounds)

x100