Formulas

Question 1

Revenue

Answer 1

average price x quantity sold

Income earned from selling products. Sometimes called sales, sales revenue or turnover.

Question 2

Total Costs

Answer 2

Variable Costs + Fixed Costs

The amount of money spent by a firm on producing a given level of output.

Question 3

Profit

Answer 3

Total Revenue - Total Costs

Question 4

Contribution per unit

Answer 4

selling price per unit - variable costs per unit

Question 5

Contribution

Answer 5

sales revenue - total variable costs

Question 6

Total contribution

Answer 6

contribution per unit × no. of units sold

Question 7

Breakeven output

Answer 7

fixed costs / Contribution per uni

Question 8

Margin of safety

Answer 8

Actual output - breakeven output

Question 9

Target profit output

Answer 9

fixed cost + target profit / Contribution per unit

Question 10

Cash inflows

Answer 10

Cash income from sales + other sources of cash

Question 11

Cash outflows

Answer 11

Raw materials + wages +rent + other items

Question 12

Net cash flow

Answer 12

cash inflows - cash outflows

Question 13

Opening balance

Answer 13

firms cash holding at the beginning of the time period being studied.

Question 14

Closing balance

Answer 14

Opening cash balance + net cash flow

Question 15

Percentage change

Answer 15

Difference / Original x 100

Question 16

Fixed costs

Answer 16

Expenses of production that do not change with output e.g. rent. They are almost always indirect costs and are sometimes called overheads.

Question 17

Costs

Answer 17

The expenses involved in making a product. Firms incur expenses by trading.

Question 18

Variable costs

Answer 18

Expenses of production that do change with output e.g. components and raw materials. They are almost always direct costs.

Question 19

Average costs

Answer 19

total costs / output

Question 20

Average variable costs

Answer 20

The cost of making one item ignoring fixed costs and is found by dividing variable cost by the level of output.

Question 21

Market size

Answer 21

Total sales of all the firms in a given market. The value is found by multiplying the number of units sold by price

Question 22

Market share

Answer 22

Measures the sales of one business as a percentage of total sales in the market. sales of firm A / total market size x 100

Question 23

Market growth

Answer 23

The change in the size of a market over time. Found by dividing the change in the size of the market by the old market size. (new market size - old market size) / old market size x 100

Question 24

Added value

Answer 24

selling price - cost of inputs

Question 25

Adding value

Answer 25

the difference between the price of the finished product/service and the cost of the inputs involved in making it

Question 26

Net profit margin

Answer 26

Net profit before tax/ sales income x 100

Question 27

Return on capital

Answer 27

Net profit/ capital invested x 100

Question 28

Labour productivity

Answer 28

Output / number of employees

Question 29

Labour turnover

Answer 29

Number of employees leaving in a given time period / number of employees x 100

Question 30

Absenteeism

Answer 30

Number of unauthorised absences / total days worked by the workforce x 100