Formulas

Question 1

Revenue (Sales or Turnover) =

Answer 1

Selling price per unit x Number of units sold

Question 2

Total variable costs =

Answer 2

Variable cost per unit x Number of units sold

Question 3

Total costs =

Answer 3

Total fixed costs + Total variable costs

Question 4

Profit =

Answer 4

Total revenue - Total costs
OR
Toal contribution - Fixed costs

Question 5

Market cap of a business =

Answer 5

Number of issued shares x Current share price

Question 6

Expected value of a decision with two possible outcomes eg. A & B =
[—- —- of A x —————- of A] + [—- —- of B x —————- of 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 the size of the market over a period of time / Original size of the 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 bought-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

Return on investment (%) =

Answer 14

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

Question 15

Gross profit =

Answer 15

Revenue - Cost of Sales

Question 16

Profit from Operations / Operating profit =

Answer 16

Gross profit – Operating Expenses

Question 17

Profit for the year =

Answer 17

Operating profit - Profit from other activities - Net finance costs - Tax

Question 18

Gross profit margin (%) =

Answer 18

(Gross profit / Revenue) x 100

Question 19

Operating profit margin (%) =

Answer 19

(Operating profit / Revenue) x 100

Question 20

Profit for the year margin (%) =

Answer 20

(Profit for the year / Revenue) x 100

Question 21

Variance =

Answer 21

Budgeted figure – Actual figure

Question 22

Contribution per unit =

Answer 22

Selling price – Variable costs per unit

Question 23

Total contribution =

Answer 23

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

Question 24

Break-even output =

Answer 24

Fixed costs / Contribution per unit
OR
Fixed costs / (Selling price - VC per unit)

Question 25

Margin of safety =

Answer 25

Actual level of output – Break-even level of output

Question 26

Labour turnover (%) =

Answer 26

(Number of staff leaving / Number of staff employed by the business) x 100

Question 27

Employee retention rate (%) for a time period =

Answer 27

(No. of employees that who remained with the business for the whole time period / No. of employees at start of time period) x 100

Question 28

Labour cost per unit =

Answer 28

Labour costs / Units of output

Question 29

Return on capital employed (ROCE) (%) =

Answer 29

(Operating profit / Capital employed) x 100
OR
(Operating profit / (Total equity + Non-current liabilities)) x 100

Question 30

Return on capital employed (ROCE) (%) =

Answer 30

(Operating profit / (Total equity + Non-current liabilities)) x 100

Question 31

Current ratio =

Answer 31

Current assets / Current liabilities

Question 32

Gearing (%) =

Answer 32

(Non-current liabilities / Total equity + Non-current liabilities) x 100
OR
(Non-current liabilities / Capital employed) x 100

Question 33

Payables days =

Answer 33

(Payables / Cost of sales) x 365

Question 34

Receivables days =

Answer 34

(Receivables / Revenue) x 365

Question 35

Inventory turnover =

Answer 35

(Cost of sales / Avg. inventories held)

Question 36

Average rate of return (%) =

Answer 36

(Avg. annual return (£) / Initial cost of project (£)) x 100

Question 37

Acid test ratio / Quick ratio =

Answer 37

(Current assets – Inventory) / Current Liabilities

Question 38

Total equity =

Answer 38

Total assets - Total liabilities