Formulas

Question 1

Formula for Revenue (sales or turnover)

Answer 1

Selling price per unit x Number of units sold

Question 2

Formula for Variable costs (total variable costs)

Answer 2

Variable cost per unit x Number of units sold

Question 3

Formula for Total costs

Answer 3

Fixed costs + Variable costs

Question 4

Formula for Profit

Answer 4

Total revenue - Total costs
OR
Total contribution - Fixed costs

Question 5

Formula for Market capitalisation of a business

Answer 5

Number of issued shares x Current share price

Question 6

Formula for Expected value of a decision with two possible outcomes

Answer 6

A & B =
[Pay-off of A x Probability of A] + [Pay-off of B x Probability of B]

Question 7

Formula for Net gain

Answer 7

Expected value - Initial cost of decision

Question 8

Formula for Market Growth (%)

Answer 8

[Change in the size of the market over a period ÷ Original size of the market] x 100

Question 9

Formula for Market Share (%)

Answer 9

[Sales of one product OR brand OR business ÷ Total sales in the market] x 100

Question 10

Formula for Added Value

Answer 10

Sales revenue - Costs of brought-in goods and services

Question 11

Formula for Labour productivity

Answer 11

Output over a time period ÷ Number of employees

Question 12

Formula for Unit costs (average costs)

Answer 12

Total costs ÷ Number of units of output

Question 13

Formula for Capacity utilisation (%)

Answer 13

[Actual output ÷ Maximum possible output] x 100

Question 14

Formula for Return on investment (ROI) (%)

Answer 14

[Profit from the investment (£) ÷ Cost of the investment (£)] x 100

Question 15

Formula for Gross profit

Answer 15

Revenue - Cost of sales

Question 16

Formula for Profit from operations

Answer 16

Operating profit =
Gross profit - Operating expenses

Question 17

Formula for Profit for the Year

Answer 17

[Operating profit + Profit from other activities] - [Net finance costs + Tax]

Question 18

Formula for Gross profit margin (%)

Answer 18

[Gross profit ÷ Revenue] x 100

Question 19

Formula for Profit from operations margin (%)

Answer 19

Operating profit margin =
[Operating profit ÷ Revenue] x 100

Question 20

Formula for Profit for the year margin (%)

Answer 20

[Profit for year ÷ Revenue] x 100

Question 21

Formula for Variance

Answer 21

Budgeted figure - actual figure

Question 22

Formula for Contribution per unit

Answer 22

Selling price - Variable costs per unit

Question 23

Formula for Total contribution

Answer 23

Contribution per unit x Units sold
OR
Total revenue - Total variable costs

Question 24

Formula for Break-Even output

Answer 24

Fixed costs ÷ Contribution per unit

Question 25

Formula for Margin of safety

Answer 25

Actual level of output - Break-even level of output

Question 26

Formula for Labour turnover (%)

Answer 26

[Number of staff leaving ÷ Number of staff employed by the business] x 100

Question 27

Formula for Employee costs as a percentage of turnover

Answer 27

[Employee costs ÷ Turnover] x 100

Question 28

Formula for Labour cost per unit

Answer 28

Labour costs ÷ Units of output

Question 29

Formula for 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

Formula for current ratio

Answer 30

Current assets ÷ Current liabilities

Question 31

Formula for Gearing (%)

Answer 31

[Non-current liabilities ÷ [Total equity + non-current liabilities]] x 100 *where total equity + non-current liabilities = capital employed

Question 32

Formula for Payables days

Answer 32

[Payables ÷ Cost of sales] x 365

Question 33

Formula for Receivables days

Answer 33

[Receivables ÷ Revenue] x 365

Question 34

Formula for Inventory turnover

Answer 34

Cost of sales ÷ Average inventories held

Question 35

Formula for Average rate of return (%)

Answer 35

[Average annual return (£) ÷ Initial cost of project (£)] x 100

Question 36

Formula for price elasticity of demand (PED)

Answer 36

% change in quantity demanded ÷ % change in price

Question 37

Formula for income elasticity of demand (YED)

Answer 37

% change in quantity demanded ÷ % change in income

Question 38

Formula for re-order level

Answer 38

Lead time x average daily usage + buffer stock level