Formulas

Question 1

unit costs (average costs)

Answer 1

Total costs / number of units of ouput.

Question 2

Capacity utilisation (%)

Answer 2

Actual output / maximum possible output x 100

Question 3

Return on investment (%)

Answer 3

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

Question 4

Gross profit

Answer 4

Revenue - costs of sales.

Question 5

Profit from operations (operating profit)

Answer 5

Gross profit - operating expenses

Question 6

Profit for the year

Answer 6

operating profit + profit from other activities - net finance costs - tax

Question 7

Gross profit margin (%)

Answer 7

Gross profit / revenue x 100

Question 8

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

Answer 8

Operating profit / revenue x 100

Question 9

Profit for the year margin (%)

Answer 9

Profit for the year / revenue x 100

Question 10

Revenue

Answer 10

Selling price per unit x number of units sold

Question 11

Variable costs (total variable costs)

Answer 11

Variable cost per unit x number of units sold.

Question 12

Total costs

Answer 12

Fixed costs + variable costs

Question 13

Profit

Answer 13

Total revenue - total costs
OR
total contribution - fixed costs

Question 14

Market capitalisation of a business

Answer 14

Number of issued shares x current share price.

Question 15

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

Answer 15

A & B =

[Pay-off of A × probability of A] + [Pay-off of B × probability of B]

Question 16

Net gain

Answer 16

Expected value - initial cost of decision

Question 17

Market growth (%)

Answer 17

Change in the size of the market over a period / original size of the market x 100

Question 18

Added value

Answer 18

Sales revenue - costs of bought in goods and services.

Question 19

Labour productivity

Answer 19

Output over a time period / number of employees.

Question 20

Variance

Answer 20

budgeted figure - actual figure.

Question 21

Contribution per unit

Answer 21

Selling price - variable costs per unit

Question 22

Total contribution

Answer 22

Contribution per unit x units sold
OR
total revenue - total variable costs

Question 23

Break even output

Answer 23

Fixed costs / contribution per unit

Question 24

Margin of safety

Answer 24

Actual level of output - break even level of output

Question 25

Labour turnover (%)

Answer 25

Number of staff leaving / number of staff employed by the business x 100

Question 26

Employee retention rate (%) for a particular time period

Answer 26

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 27

Employee costs as a percentage of turnover

Answer 27

employee costs / turnover x 100

Question 28

Labour costs per unit

Answer 28

Labour costs / units of output

Question 29

Return on capital employed (ROCE) (%)

Answer 29

Operating profit / (total equity + non-current liabilities) x 100

where total equity + non current liabilities = capital employed.

Question 30

Current ratio

Answer 30

Current assets / current liabilities

Question 31

Gearing (%)

Answer 31

Non current liabilities / (total equity + non current liabilities) x 100

where total equity + non current liabilities = capital employed.

Question 32

Payable days

Answer 32

Payable days / cost of sales x 365

Question 33

Receivable days

Answer 33

Receivables / revenue x 365

Question 34

Inventory turnover

Answer 34

Cost of sales / average inventories held

Question 35

Average rate of return (%)

Answer 35

Average annual return (£) / initial cost of project (£) x 100