formulas Flashcards
total costs (£)
fixed costs + variable costs
profit (£)
total revenue - total costs
total contribution - fixed costs
(selling price - variable costs - fixed costs)
total variable costs (£)
variable cost per unit x number of units sold
revenue (sales or turnover) (£)
selling price per unit x number of units sold
market capitalisation (£)
the total value of a companies issued shares
current share price x number of shares issued
(decision trees) expected value
(financial result of A × probability of A) + (financial result of B × probability of B)
(decision trees) net gain (£)
expected value - initial cost of decision
market size/sales volume (units)
the quantity of goods and services produced in a particular market over a period of time (usually one year)
market size/sales value (£)
total revenue generated from selling goods and services produced in a particular market over a period of time (usually one year)
market growth (%)
change in market size/original market size x 100
sales growth (%)
change in sales/original sales x 100
market share (%)
sales of one product OR brand OR business/total sales in the market x 100
price elasticity of demand (%)
change in demand/change in price x 100
coefficient range PED and YED
PED:
more than 1 (demand is more sensitive to price change, eg. cuts can = revenue increases significantly) elastic.
less than 1 (demand is less sensitive to price change) inelastic
YED:
normal goods = demand increases as income increases
inferior goods = less than 1, demand decreases as income increases eg. used cars, tesco own brand orange juice
necessities = 0-1, demand decreases as income increases eg. staple groceries like milk, own label goods.
luxury = more than 1, demand increases as income increases. eg. branded goods, expensive holidays
added value (£)
selling price - cost of raw materials
unit cost (£)
cost per unit:
total costs of production/number of units
labour productivity
output over a time period/number of employees
eg. 1000 units per employee
capacity utilisation (%)
actual level of output/maximum possible output x 100
return on investment (%)
annual return (£)/cost of investment (£) x 100
gross profit (£)
sales revenue - cost of sales
operating profit (£)
gross profit - operating expenses
profit of the year (£)
(operating profit + all other profit) - (net financial costs - tax)
gross/operating/yearly profit margin (%)
/revenue x100
variance (£)
budgeted figure - actual figure
favourable variance = actual profits are higher than budgeted
adverse variance = actual profits are lower than budgeted
contribution per unit (£)
profits made on each individual product
selling price per unit - variable costs per unit
total contribution (£)
contribution per unit x total units sold
total revenue - total variable costs
breakeven output (units)
fixed costs/contribution per unit
breakeven point
where total revenue equals total costs
margin of safety (units)
actual level of output - breakeven level of output
labour turnover (%)
number of staff leaving/number of staff employed x 100
employee retention rate (%)
number of employees who stayed for the whole period/number of employees at the start of the time period x 100
employee costs as a percentage of turnover (%)
employee costs/sales turnover x 100
labour cost per unit (£)
labour cost/units of output
return on capital employed (£)
how efficiently a business has managed its finance
operating profit/capital employed
ideally, the higher the ROCE the better (higher op profit than cap employed)
capital employed
total equity + non-current liabilities
(essentially equity is retained profits and share capital + non-current liabilities are long term debts)
current ratio (liquidity ratio)
current assets/current liabilities
eg. debtors, cash, stock
eg. creditors, overdraft
gearing (%)
non-current liabilities/capital employed x 100
(total equity + non-current liabilities = capital employed)
eg. loans, mortgages, bonds
payables/creditor days
owed by a business to others eg. suppliers. want it to be more than receivables/debtor days
payables/cost of sales x 365
receivables/debtors days
owed to a business by others eg. customers
receivables/sales revenue x 365
inventory turnover (times)
how many times the business replaces its inventory each year
cost of goods sold (£)/average inventory held (£)
average rate of return (%)
average annual return/initial cost of project x 100
cash flow
inflows - outflows
npv (net present value)
discount factor x cash flow
