Formulae Flashcards
Revenue
Selling price x number of units sold
Variable cost
Fixed cost per unit x number of units sold
Total costs
Fixed costs + Variable costs
Profit
Total revenue - total costs
Market capitalisation
Number of shares x Share price
Market growth
Change in size of market / original size of market x 100
Market share
Sales of business / total sales in the market x 100
Added value
Sales revenue - cost of bought good
Labour productivity
Output / number of employees
Unit costs
Total cost / number of units of output
Capacity utilisation
Actual output / maximum possible output x 100
Return on investment
Profit from investment / cost of the investment x 100
Gross profit
Revenue - Cost of sales
Gross profit margin
Gross profit / revenue x 100
Labour turnover
of staff leaving / # of employees at the start x 100
Labour cost per unit
Labour cost / units of output
Return on capital employed (ROCE)
Operating profit / Total equity + non current liabilities x 100
Current ratio
Current assets / current liability
Gearing
Non current liabilities / total equity + non current liabilities x 100
Payables days
Payables / CoS x 365
Receivables days
Receivables / revenue x 365
Inventory turnover
Cost of sales / average inventories held
Average rate of return
Average annual return / initial cost of project x 100
Identify the difference between profit, revenue and gross profit. Provide each formula to support your answer
Profit: revenue - total costs
The money left after paying expenses - the money that remains after all expenses have been subtracted from revenue. Portrays a business’ probability to shareholders. Profit indicates a company’s profit after all its expenses have been deducted from revenues.
Revenue: selling price x number of units sold
The amount of money generated from selling goods - does not take costs into account. Portrays how much money is generated from selling a good, without taking into account costs of it being produced.
Revenue describes income generated through business operations, while profit describes net income (total income) after deducting expenses from earnings - a more accurate representation as it takes into account costs of the product being produced.
Gross profit: revenue - cost of sales
The profit a business makes after subtracting all the costs that are related to manufacturing - the difference between revenue and cost of goods. Gross profit determines how well a company can earn a profit while managing its production and labor costs.
