Business Formulas Flashcards by CALLUM SYMES

How to calculate Total Revenue?

Total Revenue = Selling Price x Quantity Sold

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How to calculate Total Variable Costs?

Total Variable Costs = Variable Cost Per Unit x Units Made

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How to calculate Total Costs?

Total Costs = Fixed Costs + Variable Costs

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How to calculate Profit?

Profit = Revenue - Total Costs

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What is the formula for Contribution Per Unit?

Selling Price - Variable Cost Per Unit

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How do you calculate Total Contribution?

Contribution Per Unit x Units Sold

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What is the formula for Break-even Output?

Fixed Costs / Contribution Per Unit

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What is the formula for Target Profit Output?

Fixed Costs + Target Profit / Contribution Per Unit

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What is the Margin of Safety?

Total Output - Breakeven Point

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How to calculate Market Size (Value)?

Use the formula: Units Sold x Selling Price

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What is the formula for calculating market share?

Sales of one product or brand divided by sales of all products or brands, multiplied by 100.

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What is the formula for market growth?

Change in sales divided by original sales, multiplied by 100.

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How do you calculate the percentage of a number?

(Percentage ÷ 100) x Number.

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What is the formula for proportion as a percentage?

(Actual ÷ Possible) x 100.

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What is the formula for percentage change?

Change divided by original, multiplied by 100.

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What is the formula for Current Ratio?

Current Assets / Current Liabilities

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What is the formula for Acid Test Ratio?

(Current Assets - Inventories) / Current Liabilities

‘Inventories’ is the same as ‘stock’.

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What is the formula for Gearing Ratio?

(Non-current Liabilities / Capital Employed) × 100

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How is Capital Employed calculated?

Non-current Liabilities + Total Equity

What is the term for the difference between Current Assets and Current Liabilities?

Working Capital

What is the formula to calculate Gross Profit?

Revenue - Cost of sales

Example: If Revenue is $1000 and Cost of sales is $600, then Gross Profit is $400.

What are the key components of Profitability Ratios?

Profit, Profit Margins, and Profitability Ratios

What is Operating Profit?

Gross profit minus other operating expenses.

What is Net Profit?

Operating profit minus interest.

How is Gross Profit Margin calculated?

Gross Profit divided by Sales Revenue multiplied by 100.

How is Operating Profit Margin calculated?

Operating Profit divided by Sales Revenue multiplied by 100.

How is Net Profit Margin calculated?

Net Profit divided by Sales Revenue multiplied by 100.

What does 'Return on Capital Employed' measure?

It measures the operating profit as a percentage of capital employed. ## Footnote Formula: Operating Profit × 100 / Capital Employed

What is 'Price Elasticity of Demand' (PED)?

PED measures the responsiveness of quantity demanded to a change in price. ## Footnote Formula: % Change in Quantity / % Change in Price

What is 'Income Elasticity of Demand' (YED)?

YED measures the responsiveness of quantity demanded to a change in income. ## Footnote Formula: % Change in Quantity / % Change in Income

What are 'Cash Flow Forecasts'?

Cash Flow Forecasts are estimates of future financial liquidity. ## Footnote They help in planning and managing cash flow.

What is the formula to calculate Net Cash Flow?

Cash Inflows - Cash Outflows

How do you calculate the Closing Balance?

Opening Balance + Net Cash Flow

What is the Opening Balance?

Last month's closing balance.

What is the formula for Capacity Utilisation?

Current Output / Max Possible Output x 100

What is Labour Productivity?

Total Output / Number of Workers

How is Labour Turnover calculated?

Number of employees leaving / Average number of employees x 100

What is the formula for Absenteeism?

Number of absences / Total possible work days x 100

What is Investment Appraisal?

Investment Appraisal is a method to evaluate the profitability of an investment.

What is the Payback Period?

The Payback Period (also known as Simple Payback) is the time it takes for an investment to generate an amount of income equal to the cost of the investment.

How is the Payback Period calculated?

Payback Period = Full Years + (Outlay Outstanding in Payback Year / NCF in Payback Year) x 12

What does NCF stand for?

NCF stands for Net Cash Flow.

What is the formula for Average Rate of Return (ARR)?

ARR = (Total Net Cashflow - Cost of Investment) / Asset's Lifetime x 100

What is the example for calculating Payback Period?

Given NCF in year 1: £50,000, year 2: £50,000, year 3: £60,000, and Initial Investment: £130,000, calculate the Payback Period. ## Footnote Full Years = 2, Months = 2, thus Payback Period = 2 years and 2 months.

What is the formula for Net Present Value (NPV)?

(Y1 Discounting Factor x Y1 Net Cash Flow) + (Y2 Discounting Factor x Y2 Net Cash Flow) + (Y3 Discounting Factor x Y3 Net Cash Flow) + (Y4 Discounting Factor x Y4 Net Cash Flow) etc.

What is the second step in calculating NPV?

Total from step 1 - Initial Investment

How is the total from step 1 calculated?

Total from step 1 ([DF1 x NCF1] + [DF2 x NCF2] etc.) - Initial Investment