Formulae

Question 1

Revenue=

Answer 1

Revenue= selling price × units sold

Question 2

Variable costs=

Answer 2

Variable costs= variable costs per unit × units sold

Question 3

Total costs=

Answer 3

Total costs= fixed costs + variable costs

Question 4

Profit=

Answer 4

Profit= revenue - costs

Question 5

Profit=

Answer 5

Profit= Total contribution - fixed costs

Question 6

Market capitalisation=

Answer 6

Market capitalisation= shares issued × current share price

Question 7

Expected value of a decision with two possible outcomes eg.
A&B=

Answer 7

A&B= (cost of A × possibility of A) + (cost of B × possibility of B)

Question 8

Net gain=

Answer 8

Net gain= expected value - initial cost of decision

Question 9

Market growth(%)=

Answer 9

Market growth(%)= (change of original size of market over time ÷ original size of market) × 100

Question 10

Market share(%)=

Answer 10

Market share(%)= (sales of one product or business ÷ total sales in market) × 100

Question 11

Added value=

Answer 11

Added value= sales revenue - costs of bought-in goods and services

Question 12

Labour productivity=

Answer 12

Labour productivity= output over time ÷ number of employees

Question 13

Unit costs (average)=

Answer 13

Unit costs (average)= total costs ÷ number of units of output

Question 14

Capacity utilisation (%)=

Answer 14

Capacity utilisation (%)= (actual output ÷ maximum possible output) × 100

Question 15

Return on investment (%)=

Answer 15

Return on investment (%)= (profit from the investment ÷ cost of investment) × 100

Question 16

Gross profit=

Answer 16

Gross profit= revenue - variable costs

Question 17

Operating profit=

Answer 17

Operating profit= gross profit - operating expenses

Question 18

Profit for the year=

Answer 18

Profit for the year= operating profit + profit from other activities - net finance costs - tax

Question 19

Gross profit margin(%)=

Answer 19

Gross profit margin(%)= (gross profit ÷ revenue) × 100

Question 20

Operating profit margin (%)=

Answer 20

Operating profit margin (%)= (operating profit ÷ revenue) ×100

Question 21

Profit for the year margin (%)=

Answer 21

Profit for the year margin (%)= (profit for the year ÷ revenue) × 100

Question 22

Variance=

Answer 22

Variance= budgeted figure - actual figure

Question 23

Contribution per unit=

Answer 23

Contribution per unit= Selling price - variable costs per unit

Question 24

Total contribution=

Answer 24

Total contribution= contribution per unit × unit sold
Or
Total revenue - total variable costs

Question 25

Break-even output=

Answer 25

Break-even output= fixed costs ÷ contribution per unit

Question 26

Margin of safety=

Answer 26

Margin of safety= Actual level of output - break-even level of output

Question 27

Labour turnover (%)=

Answer 27

Labour turnover (%)= (number of staff leaving ÷ number of staff employed by the business) × 100

Question 28

Employee retention rate (%)=

Answer 28

Employee retention rate (%)= (number of employees remaining in a period of time ÷ number of employees at the start of the time period) × 100

Question 29

Employee costs as a percentage of turnover=

Answer 29

Employee costs as a percentage of turnover= (employee costs ÷ turnover) × 100

Question 30

Labour costs per unit=

Answer 30

Labour costs per unit= Labour costs ÷ units of output

Question 31

Return on capital employed (ROCE)(%)=

Answer 31

Return on capital employed (ROCE)(%)= (operating profit ÷ (total equity+ non-current liabilities)) × 100

Where total equity + non-current liabilities = capital employed

Question 32

Current ratio=

Answer 32

Current ratio= current assets ÷ current liabilities

Question 33

Gearing (%)=

Answer 33

Gearing (%)= (non-current liabilities ÷ (total equity + non-current liabilities) × 100

Where total equity + non-current liabilities = capital employed

Question 34

Capital employed=

Answer 34

Capital employed= Where total equity + non-current liabilities

Question 35

Payables days=

Answer 35

Payables days= (payables ÷ cost of sales) × 365

Question 36

Receivables days=

Answer 36

Receivables days= (receivables ÷ revenue) × 365

Question 37

Inventory turnover=

Answer 37

Inventory turnover= cost of sales ÷ average inventories held

Question 38

Average rate of return (%)=

Answer 38

Average rate of return (%)= (average annual return (£) ÷ initial cost of project (£)) × 100