equations to know Flashcards
market share
market share = sales of a business / total sales in the market
price elasticity of demand
PED = % change in demand / % change in price (e.g duck over pond)
income elasticity of demand
YED = % change in demand / % change in income
Breakeven
breakeven = total fixed costs / contribution per unit
contribution
contribution = selling price - variable cost per unit
total contribution
total contribution = contribution per unit x number of units sold
margin of safety
margin of safety = total output - breakeven point
gross profit
gross profit = sales revenue - cost of sales
gross profit margin
gpm = gross profit / sales revenue x 100
operating profit
operating profit = gross profit - expenses
working capital
working capital = current assets - current liabilities
Operating profit margin
OPM = operating profit / sales revenue x 100
acid test ratio
acid test ratio = current assets - stock / current liabilities
current ratio
current ratio = current assets / current liabilities
a three period moving average
- Step 1: smooth the raw sales data from the table by calculating a 3-year moving average
- Take the first 3 years data and calculate an average
- Step 2: now leave out the first year and calculate the average for the next three years
- Step 3: now add all your calculated averages to the table
- The new calculation goes next to the middle year
payback period
Use the net cash flow and add it cumulatively to understand which year it will be paid back
Months= amount left to be paid in year/ net cash inflow in year x 12months
ARR
- Calculate average annual profit
Total profit from investment = Total net cash flow - initial investment
Average annaul profit = Total profit from investment / number of years - Calculate ARR
Average annual profit / initial investment x 100
Formula for calculating the NPV
- Multiply each net cash inflow by the relevant discount factor
- Add all the annual NPVs to calculate the total return on the investment
Gearing
Non-current liabilities / total equity + noncurrent liabilities x 100
Return on capital employed (ROCE)
Operating profit / capital employed x 100
Capital employed
total equity + non current liabilities
labour productivity
total output / number of workers
labour turnover
number of staff leaving / average number of staff x 100
retention rates
number of employees serving more than one year / average number of staff
absenteeism
number of staff absent per time period / total number of staff days worked per time period x 100
GDP per capita (Gross Domestic Product)
National income / population
