FORMULAS AND KEY DATA

Question 1

Total costs

Answer 1

Fixed costs + Variable costs

Question 2

Profit

Answer 2

Total revenue - Total costs
OR
Total contribution - Fixed

Question 3

Variable costs
(total variable costs)

Answer 3

Variable cost per unit x Number of units sold

Question 4

Total revenue
(sales revenue/ turnover)

Answer 4

Selling price per unit x Number of units sold

Question 5

Market capitalisation of a business

Answer 5

Number of shares issued x current share price

Question 6

Expected value
(decision trees)

Answer 6

(P1 x outcome) + (P2 x outcome)

Question 7

Net gain
(decision trees)

Answer 7

Expected value - associated cost
(initial cost of decision)

Question 8

Market size (volume)

Answer 8

Quantity of goods and services produced in a particular market over a period of time (usually 1 year)

Question 9

Market size (value)

Answer 9

Total sales revenue generated from selling all goods and services produced in a particular market over a period of time (usually 1 year)

Question 10

Sales volume

Answer 10

Quantity of goods and services produced by a particular business over a period of time (usually 1 year)

Question 11

Sales value

Answer 11

Total sales revenue of a particular business over a period of time (usually 1 year)

Question 12

Market growth %
in year ‘X’

Answer 12

change in size of market between year1 and year2
——————————–x100
size of market in year1

Question 13

Sales growth %
in year ‘X’

Answer 13

change in sales of a product/business between year1 and year2
————————–x100
sales of product/business in year1

Question 14

Market share %

Answer 14

Sales of one product/brand/business
——————————x100
Total sales in the market

Question 15

PED

Answer 15

% change in price

Question 16

YED

Answer 16

% change in income

Question 17

YED INelastic coefficient

Answer 17

between -1 and +1

Question 18

YED ELASTIC coefficients

Answer 18

less than -1
more than +1

Question 19

YED normal, luxury and inferior goods coefficients

Answer 19

normal good= above 0
luxury good= above +1
Inferior good= below 0

Question 20

Price INelastic coefficient

Answer 20

0 to -1

Question 21

Price ELASTIC coefficient

Answer 21

below -1

Question 22

Added value (value added)

Answer 22

Sales revenue - costs of bought in goods and services

Question 23

Labour productivity

Answer 23

Number of employees

Question 24

Unit costs (average costs)

Answer 24

Number of units of output produced

Question 25

Capacity utilisation %

Answer 25

Actual output in given time period --------------------------------x100 Maximum output in given time period

Question 26

Return on investment %

Answer 26

Return on investment (£) -----------------------------x100 Cost of investment (£)

Question 27

Gross profit

Answer 27

Sales revenue - Cost of sales

Question 28

Operating profit (profit from operations)

Answer 28

Sales revenue - Cost of sales - Operating expenses

Question 29

Profit for the year

Answer 29

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

Question 30

Variance

Answer 30

The difference between an actual and budgeted figure.

Question 31

Favourable variance

Answer 31

Profits higher than forecasted

Question 32

Adverse variance

Answer 32

Profits lower than forecasted

Question 33

Contribution per unit

Answer 33

Selling price - Variable costs per unit

Question 34

Total contribution

Answer 34

Contribution per unit x units produced/sold OR Total revenue - Total variable costs

Question 35

Break-even output

Answer 35

Fixed costs ---------------- Selling price - Variable costs per unit (contribution per unit)

Question 36

Break-even level of output

Answer 36

Where total revenue equals total costs

Question 37

Break-even- Level of profit at a given level of output

Answer 37

Vertical distance between total revenue line and total cost line

Question 38

Margin of safety

Answer 38

Actual level of output - Breakeven level of output

Question 39

Gross profit margin %

Answer 39

Gross profit ---------------- x 100 Sales revenue

Question 40

Operating profit margin %

Answer 40

Operating profit ------------------------x100 Sales revenue

Question 41

Profit for year margin %

Answer 41

Profit for year ----------------------x100 Sales revenue

Question 42

Labour turnover %

Answer 42

Number of staff leaving during the year ------------------------------x100 Average number of staff employed by business during the year

Question 43

Employee retention rate for particular time period %

Answer 43

Number of employees at end of period - Number of leavers -------------------------x100 Number of employees at end of period

Question 44

Employee costs as percentage of turnover %

Answer 44

Employee costs -------------------------x100 Sales turnover

Question 45

Labour costs per unit

Answer 45

Labour costs ------------------ Units of output

Question 46

Return on capital employed (ROCE) %

Answer 46

Operating profit -----------------------x100 total equity + non current liabilities (capital employed)

Question 47

Capital employed

Answer 47

Total equity + non current liabilities

Question 48

Current ratio

Answer 48

Current assets --------------------- Current liabilities

Question 49

Gearing %

Answer 49

non current liabilities ---------------------------x100 total equity + non current liabilities (capital employed)

Question 50

Payables days

Answer 50

Payables (creditors) -------------------------- x365 Cost of sales

Question 51

Receivables days

Answer 51

Receivables (debtors) ------------------------------ x365 Cost of sales

Question 52

Inventory turnover

Answer 52

Cost of goods sold ------------------------ Average inventories held

Question 53

Average rate of return %

Answer 53

Net return from project (£) or number of years ------------------------------x100 Initial cost of project (£)

Question 54

Month of payback

Answer 54

income required ----------------------------------------------- net cash flow next year / 12