Business Formulas

Question 1

Total costs

Answer 1

Fixed costs + variable costs

Question 2

Profit

Answer 2

Total revenue - total costs

Question 3

Total variable costs

Answer 3

Variable cost per unit x number of units sold

Question 4

Total revenue

Answer 4

Selling price x units sold

Question 5

Market capitalisation

Answer 5

Number of issues shared x current share price

Question 6

Expected value

Answer 6

Probability of A x possible outcome of A
+
Probability of B x possible outcome of B

Question 7

Net gain (decision tree)

Answer 7

Expected value - cost of decision

Question 8

Market size (volume)

Answer 8

Quantity of goods and services produced in a particular market over a period of time (usually a year)

Question 9

Market size (value)

Answer 9

Total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time (usually a year

Question 10

Sales volume

Answer 10

The quantity of goods and services produced by a particular business over a period of time (usually a year)

Question 11

Sales value

Answer 11

The total sales revenue of a particular business over a period of time (usually a year)

Question 12

Market growth (%) in year ‘X’

Answer 12

Change in sales of the market between year (x-1) and year x

/

Size of the market in year (x-1)

X 100

Question 13

Sales (%) in year ‘x’

Answer 13

Change in sales of product or business between year (x-1) and year x

/

Sales of product or business in year (x-1)

X 100

Question 14

Market share (%)

Answer 14

Sales of one product or brand or business

/

Total sales in the market

X 100

Question 15

Added value

Answer 15

Sales revenue - costs of bought in goods and services

Question 16

Labour productivity

Answer 16

Output per time period
/
No of employees

Question 17

Unit costs (average costs)

Answer 17

Total costs of production
/
No of units of output produced

Question 18

Capacity utilisation

Answer 18

Actual output in time period
/
Max possible output in time period

X 100

Question 19

Return on investment (%)

Answer 19

Return on investment
/
Cost of investment
X 100

Question 20

Gross profit

Answer 20

Sales revenue - cost of sales

Question 21

Operating profit

Answer 21

Sales revenue - cost of sales - operating expenses

Question 22

Profit for the year

Answer 22

Operating profit + profit from other activities - net finance costs - tax

Question 23

Variance

Answer 23

The difference between the budgeted figure and the actual figure

Question 24

Contribution per unit

Answer 24

Selling price - variable costs per unit

Question 25

Total contribution

Answer 25

= contribution per unit x units sold

OR

= total revenue - total variable costs

Question 26

Break even output

Answer 26

Fixed costs
/
Contribution per unit

Question 27

Margin of safety

Answer 27

Actual level of output - breakeven level of output

Question 28

Gross profit margin (%)

Answer 28

Gross profit
/
Sales revenue

X100

Question 29

Operating profit margin (%)

Answer 29

Operating profit
/
Sales revenue

X100

Question 30

Profit for the year margin (%)

Answer 30

Profit for the year
/
Sales revenue

X100

Question 31

Labour turnover (%)

Answer 31

No of staff leaving during year
/
Av no of staff employed during year

X100

Question 32

Employee retention rate (%) for particular time period

Answer 32

No of employees at end of period - no of leavers
/
Number of employees at the end of the period
X 100

Question 33

Employee costs as a percentage of turnover

Answer 33

Employee costs
/
Sales turnover
X 100

Question 34

Labour costs per unit

Answer 34

Labour costs
/
Units of output

Question 35

Current ratio

Answer 35

Current assets
/
Current liabilities

Question 36

Inventory turnover

Answer 36

Cost of goods sold
/
Av inventories held

Question 37

Average rate of return (%)

Answer 37

Net return from project or number of years
/
Initial cost of project
X 100