Formulas

Question 1

Revenue (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

OR

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 2 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 size of market over a period ÷ original size of 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 brought-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

Capacity utilisation (%)

Answer 14

(Actual output ÷ maximum possible output) x 100

Question 15

Return on investment (%)

Answer 15

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

Question 16

Gross profit

Answer 16

Revenue - cost of sales

Question 17

Profit from operations/operating profit

Answer 17

Gross profit - operating expenses

Question 18

Profit for year

Answer 18

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

Question 19

Gross profit margin (%)

Answer 19

(Gross profit ÷ revenue) x 100

Question 20

Profit from operations margin / operating profit margin (%)

Answer 20

(Operating profit/revenue) x 100

Question 21

Profit for year margin (%)

Answer 21

(Profit for year/revenue) x 100

Question 22

Variance

Answer 22

Budgeted figure - actual figure

Question 23

Contribution per unit

Answer 23

Selling price - variable costs per unit

Question 24

Total contribution

Answer 24

Contribution per unit x units sold

OR

Total revenue - total variable costs

Question 25

Break-even output

Answer 25

Fixed costs/contribution per unit

Question 26

Margin of safety

Answer 26

Actual level of output - break even level of output

Question 27

Labour turnover (%)

Answer 27

(Number of staff leaving/number of staff employed by business) × 100

Question 28

Employee retention rate (%) for a particular time period

Answer 28

(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 29

Employee costs as percentage of turnover

Answer 29

(Employee costs/turnover) x 100

Question 30

Labour costs per unit

Answer 30

Labour costs/units of output

Question 31

Return on capital employed (ROCE) (%)

Answer 31

(Operating profit/capital employed) x 100

Question 32

Capital employed

Answer 32

Total equity + non-current liabilities

Question 33

Current ration

Answer 33

Current assets/current liabilities

Question 34

Gearing (%)

Answer 34

(Non-current liabilities/capital employed) x 100

Question 35

Payables days

Answer 35

(Payables/cost of sales) x 365

Question 36

Receivables days

Answer 36

(Receivables/revenue) x 365

Question 37

Inventory turnover

Answer 37

Cost of sales/average inventories held

Question 38

Average rate of return (%)

Answer 38

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