KEY FORMULAS YEAR1 Flashcards
MARKET SHARE
Market share = (Sales of a product or business/ Total market sales) x 100
MARKET GROWTH
Market growth= Market size (new) – Market size (old)/ market size (old) x100
PRICE ELASTICITY OF DEMAND
Price elasticity of demand = % Change in quantity demanded/ % Change in price
INCOME ELASTICITY OF DEMAND
Income elasticity of demand = % Change in quantity demanded/ % Change in income
NET FLOW CASH
Net cash flow = Total inflows – Total outflows
SALES VOLUME
Sales volume = total number of units sold over a period of time
[sales revenue ÷ selling price]
SALES REVENUE
Sales revenue = number of units sold x unit price
TOTAL VARIABLE COSTS
Total variable costs = number of units sold x variable cost per unit
TOTAL COSTS
Total costs = Fixed costs + variable costs
CONTRIBUTION PER UNIT
Contribution per unit = Selling price per unit – Variable cost per unit
TOTAL CONTRIBUTION
Total contribution = Contribution per unit x Number of units sold
BREAK EVEN
Break-even = Fixed costs/ Contribution per unit
MARGIN OF SAFETY
Margin of safety = Actual Sales – Break even output
VARIANCE
Variance = Actual – Budget
GROSS PROFIT
Gross profit = Sales revenue minus cost of sales
OPERATING PROFIT
Operating profit = Gross profit minus overheads
NET PROFIT
Net profit = Operating Profit +/- finance costs
GROSS PROFIT MARGIN
Gross profit margin = (Gross profit / Sales revenue) x 100
OPERATING PROFIT MARGIN
Operating profit margin = (Operating profit/ Sales revenue) x 100
PROFIT FOR THE YEAR (NET PROFIT MARGIN)
Profit for the year (net profit) margin = (Profit for the year / Sales revenue) x 100
CURRENT RATIO
Current ratio = Current assets/ current liabilities
ACID TEST RATIO
Acid test ratio = (Current assets – stock) / current liabilities
PRODUCTIVITY
Productivity (labour) = Output per period (units)/ Number of employees in that period
AVERAGE UNIT COST
Average unit cost= Total costs / total output
CAPACITY UTILISATION
Capacity utilisation = (Actual level of output/ Maximum possible output) x 100
