Business ratio formulas

Question 1

Revenue?

Answer 1

Selling price per unit x units sold

Question 2

Variable costs?

Answer 2

Variable cost per unit x units sold

Question 3

Total costs?

Answer 3

fixed costs + variable costs

Question 4

Profit?

Answer 4

Total revenue - total costs

Question 5

Market capitalisation of a business?

Answer 5

Number of issued shares x current share price

Question 6

Net gain?

Answer 6

Expected value - initial cost of decision

Question 7

Market growth?

Answer 7

(Change in the size of the market over a period / original size of the market) x 100

Question 8

Market share?

Answer 8

(sales of one product, brand or business / total sales in the market) x 100

Question 9

Added value?

Answer 9

Sales revenue - costs of bought in goods and services

Question 10

Labour productivity?

Answer 10

Output / number of employees

Question 11

Unit costs?

Answer 11

Total costs / number of units of output

Question 12

Capacity utilisation?

Answer 12

(Actual output / maximum possible output) x 100

Question 13

Return on investment?

Answer 13

(Profit from the investment / cost of the investment) x 100

Question 14

Gross profit?

Answer 14

Revenue - cost of sales

Question 15

Operating profit?

Answer 15

Gross profit - operating expenses

Question 16

Profit for the year?

Answer 16

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

Question 17

Gross profit margin?

Answer 17

(Gross profit / revenue) x 100

Question 18

Operating profit margin?

Answer 18

(Operating profit / revenue) x 100

Question 19

Profit for year margin?

Answer 19

(Profit for year / revenue) x 100

Question 20

Variance?

Answer 20

Budgeted figure - actual figure

Question 21

Expected value of a decision with two possible outcomes?

Answer 21

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

Question 22

Contribution per unit?

Answer 22

Selling price - variable costs per unit

Question 23

Total contribution?

Answer 23

Contribution per unit x units sold

Question 24

Break-even output?

Answer 24

Fixed costs / contribution per unit

Question 25

Margin of safety?

Answer 25

Actual level of output - break-even level of output

Question 26

Labour turnover?

Answer 26

(Number of staff leaving / number of staff employed) x 100

Question 27

Employee retention rate?

Answer 27

(Number of employees who remained with the business / number of employees at the start) x 100

Question 28

Employee cost as a percentage of turnover?

Answer 28

(Employee costs / turnover) x 100

Question 29

Labour cost per unit?

Answer 29

Labour costs / units of output

Question 30

ROCE?

Answer 30

(Operating profit / total equity + non current liabilities) x 100

Question 31

Current ratio?

Answer 31

Current assets / current liabilities

Question 32

Gearing?

Answer 32

(Non current liabilities / total equity + non current liabilities) x 100

Question 33

Payables days?

Answer 33

(Payables / cost of sales) x 365

Question 34

Receivables days?

Answer 34

(Receivables / revenue) x 365

Question 35

Inventory turnover?

Answer 35

Cost of sales / average inventories held

Question 36

Average rate of return?

Answer 36

(Average annual return / initial cost of project) x 100