Calculations Flashcards
Market share
Business sales
———————— x 100
total market sales
Total variable costs
Number of units sold x variable costs per
unit
Total costs
Fixed costs + variable costs
Sales revenue
Number of units sold x unit price
Sales volume
Units x period of time
Price elasticity of demand (PED)
% change in quantity demanded
——————————————
% change in price
Income elasticity of demand (YED)
% change in quantity demanded
——————————————
% change in income
Gross profit
Sales revenue - cost of sales
Operating profit
Gross profit - operating expenses
Net profit
Operating profit - interest OR tax
Gross profit margin
Gross profit
—————— x 100
Sales revenue
Operating profit margin
Operating profit
———————— x 100
Sales revenue
Net profit margin
Net profit
————— x 100
Sales revenue
Break even
Fixed costs
———————
Contribution per unit
Contribution per unit
Selling price - variable costs per unit
per unit
Total contribution
Contribution x number of units sold
per unit
Margin of safety
Actual or - break even sales
budgeted
sales
Midpoint of margin of safety
(Break even + total units sold)
——————————————
2
Current ratio
Current assets
———————
Current liabilities
Acid test ratio
(Current assets - stock)
——————————-
Current liabilities
Working capital
Current assets - current liabilities
Net cash flow
Total inflows - total outflows
Variance
Actual - Budget
Productivity (Labour)
Output per period (units)
————————————
Number of employees
Capacity utilisation
Actual level of output
—————————— x 100
Maximum possible output
Average rate of return
Average net cash flow for the lift of the project
————————————————- x 100
Project cost (initial investment amount)
Return on capital employed (ROCE)
Operating profit
———————— x 100
Capital employed
% change
New - old
————- x 100
Old
Calculating a 3-period moving average
Example:
2008 - 500
2009 - 770
2010 - 900
500 + 770 + 900
———————- = 723.3
3
Calculating a 4-quarter moving average
Same thing as 3 but with 4 pieces of data
Example:
600 + 700 + 850 + 350
——————————- = 625
4
Payback calculation
Example:
Proposal 1 costs £120000
Paid back in two years because
Year 1 = £80,000
Year 2 = £40,000
BUT
Proposal 2 costs £95,000 and makes £90,000 but year 3
Year 4 = £60,000 so only £5000 needed
5000
——— x 12 = 0.9 (round this up to 1)
60000
Average rate of return (investment appraisal version)
- Add up all the cash inflows from the all the years
- Minus the original cost of the project
- Then divide this by the number of years the project runs for.
- Now take this figure and divide it by the cost of the project so e.g., 50/70 x 100
Net present value (NPV)
Example:
Discount is 20% so multiple each cash flow by the discount
Year 0 = 120000 x 1.00 = 120000
Year 1 = 80000 x 0.80 = 64000
Year 2 = 40000 x 0.64 = 25600
To get 0.64 it’s 20% x 0.8 = 0.16 and then minus the 0.16 from 0.8
NPV is all the NPY values added together minus the total cost
Decision trees
- Start with a decision point
- Add two decisions
- Add chance modes to the decisions (A and B)
- Add profitability data
- Add the expect loss and profit from each decision
- Calculate expect outcome:
Success value x profit + failure x loss
E.g., 0.2 x 15M + 0.8 x - 2M = £1.4M
BUT
If the costs of the projects are given to you at the beginning then:
- add together the outcomes and then minus the cost of the project
E.g., 15M + - 2M = 13M
13M - 1M = £12M in profit
CPA diagrams
EST = earliest start time (top right)
LFT = lastest finish time (bottom right)
The lines between the nodes say the duration of the task
For the next EST add the duration days to the previous EST
E.g., Node 1 = 0 EST + duration of 3 days = Node 2 = 3 EST (adding the days forward)
ALWAYS TAKE THE LONGEST EST
LFT = minusing the day so Node 9 = 68 LFT duration = 4 days so Node 8 = 64 LFT
CPA diagram: Float time
Float time = LFT - duration - EST
Gearing ratio
Non-current liabilities
——————————— x 100
Capital employed
Labour productivity
Total output
—————————
Number of workers
Labour turnover
Number of employees leaving
——————————————— x 100
Average number of employees
Absenteeism
Number of work days lost from absence
————————————————- x 100
Total possible days worked
Capital employed
Non-current assets + total equity
