Theme 2 - Formulas

Question 1

Gross Profit

Answer 1

(Revenue) - (Cost of sales)

Question 2

Operating profit

Answer 2

(Gross Profit) - (Fixed Overheads)

Question 3

Net Profit

Answer 3

(Operating Profit) - (Financing and tax)

Question 4

Gross Profit Margin

Answer 4

(Gross profit) / (sales revenue) x100

Question 5

Operating Profit margin

Answer 5

(Operating profit) / (sales revenue) x100

Question 6

Net Profit Margin

Answer 6

(Net profit) / (sales revenue) x100

Question 7

Current Ratio

Answer 7

(Current Assets) / (Current Liabilities), this is expressed as a ratio
The ideal ratio is 1.5:1, meaning £1.50 of assets for £1 of current liabilities

Question 8

Acid Test Ratio

Answer 8

(Current Assets - inventories) / (Current liabilities)

The ideal ratio is 1:1, showing they have eqaul liquid assets to liabilities

Question 9

Break-even point

Answer 9

(Fixed Costs) / (Price - variable costs per unit(otherwise know as contribution per unit))

Question 10

Capacity Utilisation

Answer 10

(Current Output) / (Max possible Output) x100

Question 11

Net cash flow

Answer 11

Total inflows – Total outflows

Question 12

Sales volume

Answer 12

total number of units sold over a period of time

Question 13

Sales revenue

Answer 13

number of units sold x unit price

Question 14

Total variable costs

Answer 14

number of units sold x variable cost per unit

Question 15

Total costs

Answer 15

Fixed costs + variable costs

Question 16

Contribution per unit

Answer 16

Selling price per unit – Variable cost per unit

Question 17

Total contribution

Answer 17

Contribution per unit x Number of units sold

Question 18

Variance

Answer 18

Actual – Budget

Question 19

Productivity (labour)

Answer 19

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

Question 20

PED

Answer 20

% change in QD / % change in price

Question 21

YED

Answer 21

% change in quantity demanded / % change in income

Question 22

Percentage change

Answer 22

(Difference (between two numbers) / the original number ) x 100 e.g 5 to 7 —> 2/5 = 0.4 = 40%

Question 23

Gearing

Answer 23

(Long-term liabiltes / capital employed) x 100

Question 24

ROCE

Answer 24

(Operating profit / capital employed ) x 100

Question 25

Capital Employed

Answer 25

total equity + non-current liabilities

Question 26

Labour turnover

Answer 26

(total number of staff leaving / average number of total staff) x100

Question 27

Average number of total staff

Answer 27

(Number of staff at the beginning of the year + number of staff at the end) / 2