Calculations

Question 1

Market share

Answer 1

Business sales
———————— x 100
total market sales

Question 2

Total variable costs

Answer 2

Number of units sold x variable costs per
unit

Question 3

Total costs

Answer 3

Fixed costs + variable costs

Question 4

Sales revenue

Answer 4

Number of units sold x unit price

Question 5

Sales volume

Answer 5

Units x period of time

Question 6

Price elasticity of demand (PED)

Answer 6

% change in quantity demanded
——————————————
% change in price

Question 7

Income elasticity of demand (YED)

Answer 7

% change in quantity demanded
——————————————
% change in income

Question 8

Gross profit

Answer 8

Sales revenue - cost of sales

Question 9

Operating profit

Answer 9

Gross profit - operating expenses

Question 10

Net profit

Answer 10

Operating profit - interest OR tax

Question 11

Gross profit margin

Answer 11

Gross profit
—————— x 100
Sales revenue

Question 12

Operating profit margin

Answer 12

Operating profit
———————— x 100
Sales revenue

Question 13

Net profit margin

Answer 13

Net profit
————— x 100
Sales revenue

Question 14

Break even

Answer 14

Fixed costs
———————
Contribution per unit

Question 15

Contribution per unit

Answer 15

Selling price - variable costs per unit
per unit

Question 16

Total contribution

Answer 16

Contribution x number of units sold
per unit

Question 17

Margin of safety

Answer 17

Actual or - break even sales
budgeted
sales

Question 18

Midpoint of margin of safety

Answer 18

(Break even + total units sold)
——————————————
2

Question 19

Current ratio

Answer 19

Current assets
———————
Current liabilities

Question 20

Acid test ratio

Answer 20

(Current assets - stock)
——————————-
Current liabilities

Question 21

Working capital

Answer 21

Current assets - current liabilities

Question 22

Net cash flow

Answer 22

Total inflows - total outflows

Question 23

Variance

Answer 23

Actual - Budget

Question 24

Productivity (Labour)

Answer 24

Output per period (units)
————————————
Number of employees

Question 25

Capacity utilisation

Answer 25

Actual level of output —————————— x 100 Maximum possible output

Question 26

Average rate of return

Answer 26

Average net cash flow for the lift of the project ————————————————- x 100 Project cost (initial investment amount)

Question 27

Return on capital employed (ROCE)

Answer 27

Operating profit ———————— x 100 Capital employed

Question 28

% change

Answer 28

New - old ————- x 100 Old

Question 29

Calculating a 3-period moving average

Answer 29

Example: 2008 - 500 2009 - 770 2010 - 900 500 + 770 + 900 ———————- = 723.3 3

Question 30

Calculating a 4-quarter moving average

Answer 30

Same thing as 3 but with 4 pieces of data Example: 600 + 700 + 850 + 350 ——————————- = 625 4

Question 31

Payback calculation

Answer 31

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

Question 32

Average rate of return (investment appraisal version)

Answer 32

1. Add up all the cash inflows from the all the years 2. Minus the original cost of the project 3. Then divide this by the number of years the project runs for. 4. Now take this figure and divide it by the cost of the project so e.g., 50/70 x 100

Question 33

Net present value (NPV)

Answer 33

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

Question 34

Decision trees

Answer 34

1. Start with a decision point 2. Add two decisions 3. Add chance modes to the decisions (A and B) 4. Add profitability data 5. Add the expect loss and profit from each decision 6. 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

Question 35

CPA diagrams

Answer 35

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

Question 36

CPA diagram: Float time

Answer 36

Float time = LFT - duration - EST

Question 37

Gearing ratio

Answer 37

Non-current liabilities ——————————— x 100 Capital employed

Question 38

Labour productivity

Answer 38

Total output ————————— Number of workers

Question 39

Labour turnover

Answer 39

Number of employees leaving ——————————————— x 100 Average number of employees

Question 40

Absenteeism

Answer 40

Number of work days lost from absence ————————————————- x 100 Total possible days worked

Question 41

Capital employed

Answer 41

Non-current assets + total equity