Formulae

Question 1

Revenue (or sales or turnover)

Answer 1

Selling price per unit x Number of units sold

Question 2

Variable costs (total variable costs)

Answer 2

Variable cost per unit x Number of units sold

Question 3

Total costs

Answer 3

Fixed costs + Variable costs

Question 4

Profit

Answer 4

Total revenue - Total costs

Total contribution - Fixed costs

Question 5

Market capitalisation of a business

Answer 5

Number of issued shares x Current share price

Question 6

Expected value of a decision with two possible outcomes e.g. A&B

Answer 6

[Pay-off of A x Probability of A] + [Pay-off of B x Probability of B]

Question 7

Net gain

Answer 7

Expected value - Initial cost of decision

Question 8

Market growth (%)

Answer 8

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

Question 9

Market share (%)

Answer 9

(Sales of one product OR brand OR business / Total sales in the market) x 100

Question 10

Added value

Answer 10

Sales revenue - Costs of bought-in goods and services

Question 11

Labour productivity

Answer 11

Output over a time period / number of employees

Question 12

Unit costs (average costs)

Answer 12

Total costs / Number of units of output

Question 13

Capacity utilisation (%)

Answer 13

(Actual output / maximum possible output) x 100

Question 14

Return on investment (%)

Answer 14

(Profit from the investment (£) / Cost of the investment (£)) x 100

Question 15

Gross profit

Answer 15

Revenue - Cost of sales

Question 16

Profit from operations (operating profit)

Answer 16

Gross profit - Operating expenses

Question 17

Profit for year

Answer 17

Operating profit + Profit from other activities - Net finance costs - Tax

Question 18

Gross profit margin (%)

Answer 18

(Gross profit / Revenue) x 100

Question 19

Profit from operations margin (operating profit margin) (%)

Answer 19

(Operating profit / Revenue) x 100

Question 20

Profit for year margin (%)

Answer 20

(Profit for year / Revenue) x 100

Question 21

Variance

Answer 21

Budgeted figure - Actual figure

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

Total revenue - Total variable costs

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 if staff leaving / Number of staff employed by the business) x 100

Question 27

Employee retention rate (%) for a particular time period

Answer 27

(Number of employees who remained with the business for the whole period of time / Number of employees at start of the time period) x 100

Question 28

Employee costs 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

Return on capital employed (ROCE) (%)

Answer 30

(Operating profit / Total equity + Non-current liabilities) x 100

Where total equity + Non-current liabilities = capital employed

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

Where total equity + non-current liabilities = capital employed

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