Formulas Flashcards
Total costs
Fixed costs + variable costs
Profit
Total revenue - total costs
Variable costs
Variable cost per unit X units sold
Revenue
Selling price X units sold
Market capitalisation
Number of issued shares X current share price
Expected value of a decision w two possible outcomes
(Probability 1 X outcome 1) + (probability 2 X outcome 2)
In a decision tree NET GAIN
Expected value - initial cost of investment
Market size
Volume
Quantity of goods and services produced in a particular market over a period of time
Market size value)
Total sales revenue generated from selling all the good and services produced in a particular market Over a period of time
Sales volume
Quantity of goods and services produced by a particular business over a period of time (usually a year)
Sales value
Total sales revenue of a particular business over a period of time
Market growth (%)
Change in size of market between year (x-1) and year x / size of market in year (x-1) X 100
Sales growth %
Change in sales of product or business between year (x-1) and year x / sales of product or business in year (x-1)
Market share (%)
Sales of one product OR brand OR business / total sales in the market X 100
Price elasticity if demand
% change in quantity demanded / % change price
Income elasticity of demand
% change in quantity demanded / % change in consumer income
Calculating percentage change
Find out percentage difference between two numbers then divide by original then X by 100
Added value (value added)
Sales revenue - costs of bought in good and services
Labour productivity
Total output / number of employees
Unit costs
Total cost of production / number of units of output produced
Capacity utilisation %
Actual output / maximum possible output X 100
Return on investment %
Return on investment (£) / cost of investment (£) X 100
Gross profit
Sales revenue - cost of sales (direct costs - materials and shop floor labour)
Operating profit
Sales revenue - cost of sales - operating expenses (e.g. rent)
Profit for year
Operating profit + profit from other activities - net finance costs - tax
Variance
Difference between actual and budgeted figure
Favourable results in profits being higher than forecasted
Adverse results in profits beings lower than forecast
Contribution per unit
Selling price - Variable costs per unit
Total contribution
Total revenue - total variable costs
OR
Contribution per unit X units sold
Break even
Fixed costs / contribution per units
On a break even chart….
The break even level output is the level of output at which revenue = total costs
Margin of safety
Actual level of output - break even level of output
Gross profit margin (%)
Gross profit / sales revenue X 100
Operating profit margin (%)
Operating profit / sales revenue X 100
Profit for year margin (%)
Profit for year / sales revenue X 100
Labour turnover (%)
Number of staff leaving during the year / average number of staff employed by the business during the year X 100
Employee retention rate (%) for a particular time period
Number of employees leaving / number of employees at end of period X 100
Employees costs as a percentage of turnover
Employee costs / sales turnover X 100
Labour cost per unit
Labour costs / units of output
Return on capital employed (ROCE)(%)
Operating profit / total equity + non current liabilities X 100
Capital employed
Equity + non current liabilities
Current ratio
Current assets / current liabilities
Gearing
Non current liabilities / total equity + non current liabilities (capital employed) X 100
Payable days
Payables / cost of sales X 365
Receivables days
Receivables / revenue X 365
Inventory turnover
Costs of goods sold / average inventories held
To determine number of days DIVIDE by 365
Cost of sales / average inventories
Average rate of return (%)
Average annual profit / investment cost X 100
Annual average profit = total net return minus the initial investment / number of years
Net present value
Net return X discounter value
Payback
A
Net current assets
Current assets - current liabilities
The working capital that a business has available
Net assets
Total assets - total liabilities I
The value of a business
Total equity will always be equal to….
Net assets - it’s represents how a business has been financed
Gross profit
Sales revenue - cost of sales
Actual capacity (capacity utilisation top part)
Labour productivity (x per employee) x average number of employees
Depeciaion
Cost - residual value (last) / estimated useful number of years
Operating forfeit
Minus overheads from gross profit
