KEY FORMULAS YEAR1

Question 1

MARKET SHARE

Answer 1

Market share = (Sales of a product or business/ Total market sales) x 100

Question 2

MARKET GROWTH

Answer 2

Market growth= Market size (new) – Market size (old)/ market size (old) x100

Question 3

PRICE ELASTICITY OF DEMAND

Answer 3

Price elasticity of demand = % Change in quantity demanded/ % Change in price

Question 4

INCOME ELASTICITY OF DEMAND

Answer 4

Income elasticity of demand = % Change in quantity demanded/ % Change in income

Question 5

NET FLOW CASH

Answer 5

Net cash flow = Total inflows – Total outflows

Question 6

SALES VOLUME

Answer 6

Sales volume = total number of units sold over a period of time

[sales revenue ÷ selling price]

Question 7

SALES REVENUE

Answer 7

Sales revenue = number of units sold x unit price

Question 8

TOTAL VARIABLE COSTS

Answer 8

Total variable costs = number of units sold x variable cost per unit

Question 9

TOTAL COSTS

Answer 9

Total costs = Fixed costs + variable costs

Question 10

CONTRIBUTION PER UNIT

Answer 10

Contribution per unit = Selling price per unit – Variable cost per unit

Question 11

TOTAL CONTRIBUTION

Answer 11

Total contribution = Contribution per unit x Number of units sold

Question 12

BREAK EVEN

Answer 12

Break-even = Fixed costs/ Contribution per unit

Question 13

MARGIN OF SAFETY

Answer 13

Margin of safety = Actual Sales – Break even output

Question 14

VARIANCE

Answer 14

Variance = Actual – Budget

Question 15

GROSS PROFIT

Answer 15

Gross profit = Sales revenue minus cost of sales

Question 16

OPERATING PROFIT

Answer 16

Operating profit = Gross profit minus overheads

Question 17

NET PROFIT

Answer 17

Net profit = Operating Profit +/- finance costs

Question 18

GROSS PROFIT MARGIN

Answer 18

Gross profit margin = (Gross profit / Sales revenue) x 100

Question 19

OPERATING PROFIT MARGIN

Answer 19

Operating profit margin = (Operating profit/ Sales revenue) x 100

Question 20

PROFIT FOR THE YEAR (NET PROFIT MARGIN)

Answer 20

Profit for the year (net profit) margin = (Profit for the year / Sales revenue) x 100

Question 21

CURRENT RATIO

Answer 21

Current ratio = Current assets/ current liabilities

Question 22

ACID TEST RATIO

Answer 22

Acid test ratio = (Current assets – stock) / current liabilities

Question 23

PRODUCTIVITY

Answer 23

Productivity (labour) = Output per period (units)/ Number of employees in that period

Question 24

AVERAGE UNIT COST

Answer 24

Average unit cost= Total costs / total output

Question 25

CAPACITY UTILISATION

Answer 25

Capacity utilisation = (Actual level of output/ Maximum possible output) x 100