Equations Flashcards
Expected Value (of a decision with two outcomes)
Expected Value = (Pay-off of A x Probability of A) + (Pay-off of B x Probability of B)
Net Gain
Net Gain = Expected Value - Initial Cost of Decision
Unit Costs (Average Costs)
Unit costs (average costs) = Total costs / Number of units of output
Capacity Utilisation (%)
Capacity utilisation (%) = (Actual output / Maximum possible output) × 100
Return on Investment (%)
Return on investment (%) = (Profit from the investment ($) / Cost of the investment ($)) × 100
Gross Profit
Gross Profit = Revenue - Cost of Sales
Profit from Operations?
Profit from Operations = Operating profit = Gross profit - Operating Expenses
Profit for Year
Profit for year = Operating profit + Profit from other activities - Net finance costs - Tax
Gross Profit Margin (%)
Gross profit margin (%) = (Gross profit / Revenue) × 100
Profit from Operations Margin (%)
Profit from operations margin = Operating profit margin (%) = (Operating profit / Revenue) × 100
What is the formula for Profit for Year Margin (%)?
Profit for year margin (%) = (Profit for year / Revenue) × 100
Variance
Variance = Budgeted figure - Actual figure
Revenue (Sales or Turnover)
Revenue (Sales or Turnover) = Selling price per unit × Number of units sold
Variable costs (Total variable costs)
Variable costs (Total variable costs) = Variable cost per unit × Number of units sold
Total costs
Total costs = Fixed costs + Variable costs
Profit
Profit = Total revenue - Total costs OR Total contribution - Fixed costs
Market capitalisation of a business
Market capitalisation of a business = Number of issued shares x Current share price
Market growth (%)
Market growth (%) = (Change in the size of the market over a period × 100) / Original size of the market
Market share (%)
Market share (%) = (Sales of one product/ brand/ business × 100) / Total sales in the market
Added value
Added value = Sales revenue - costs of bought-in goods and services
Labour productivity
Labour productivity = Output over a time period / Number of employees
Contribution per unit
Contribution per unit = Selling price - Variable costs per unit
Total contribution
Total contribution = Contribution per unit x Units sold
OR
Total contribution = Total revenue - Total variable costs
Break-even output
Break-even output = Fixed costs / Contribution per unit
Margin of safety
Margin of safety = Actual level of output - Break-even level of output
Labour turnover (%)
Labour turnover (%) = (Number of staff leaving / Number of staff employed by the business) × 100
Employee costs as percentage of turnover
Employee costs as percentage of turnover = (Employee costs / Turnover) × 100
Labour cost per unit
Labour cost per unit = Labour costs / Units of output
Return on capital employed (ROCE) (%)
ROCE (%) = (Operating profit / (Total equity + non-current liabilities)) × 100
Where total equity + non-current liabilities = capital employed
Current Ratio
Current assets / Current liabilities
Gearing (%)
(Non-current liabilities / (Total equity + non-current liabilities)) × 100
Where total equity + non-current liabilities = capital employed
Payables Days
(Payables / Cost of sales) × 365
Receivables Days
(Receivables / Revenue) × 365
Inventory Turnover
Cost of sales / Average inventories held
Average Rate of Return (%)
(Average annual return (E) / Initial cost of project) × 100
