what you need to know Flashcards
Total costs
Fixed costs + Variable costs
Profit
Total revenue – Total costs
OR
Total contribution – Fixed costs
Variable costs (Total variable costs)
Variable cost per unit x Number of units sold
Total revenue (Sales revenue or Turnover)
Selling price per unit x Number of units sold
Market capitalisation of a business
Number of issued shares x Current share price
Expected value of a decision with two possible outcomes - A & B
[Pay-off of A x probability of A] + [Pay-off of B x probability of B]
In a decision tree Net gain
Expected value – Initial cost of decision
Market size (volume)
market size is the quantity of goods and services produced in a particular market over a period of time (usually one year).
Market size (value)
is the total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time (usually one year).
Sales volume is
the quantity of goods and services produced by a particular business over a period of time (usually one year).
Sales value
the total sales revenue of a particular business over a period of time (usually one year).
Market growth (%) in year ‘X’
Change in the size of the market between year (X-1) and year X/Size of market in year (X-1) x100
Sales growth (%) in year ‘X’
(sales figure in year x - sales figure in year x-1)/ sales figure in year x-1 x 100
Market share (%)
Sales of one product OR brand OR business/Total sales in the market x100
Price elasticity of demand
% change in quantity demanded/ % change in the price
Price inelastic demand has a coefficient in the range
0 to –1.
Price elastic demand has a coefficient in the range
–1 to – ∞.
Added value (value added)
sales revenue- cost of production
Labour productivity
output in a given time period/ number of employees
Unit costs (average costs)
total costs/output
Capacity utilisation (%)
actual output/maximum output x100
Re-order quantity
Lead time (in days) x Average daily usage
Reorder quantity is the total number of product units you request from a manufacturer or supplier on an inventory replenishment purchase order
Re-order level
Re-order quantity + Minimum inventory level
Return on investment (%)
return on investment/ cost of investment x 100
Gross Profit
Sales Revenue – Cost of Sales
Operating profit
gross profit (Sales Revenue – Cost of Sales)– Operating Expenses
Profit for year
(Operating profit + Profit from other activities)– Net finance costs – Tax
what is a Variance
The difference between an actual and a budgeted figure.
what is a favourable varience
when the actual outcome serves the business better then the budgeted outcome
what is a adverse varience
when the actual outcome is worse of for the business then the budgeted outcome
Contribution per unit
Selling price – Variable costs per unit
Total contribution
Contribution per unit x Units produced/sold
OR
Total contribution = Total revenueminusTotal variable costs
Break-even output
fixed costs/ contriubution per unit x 100
Output at which total revenue covers total costs
at what point on a break even graph does the break even level of output occur
where total revenue is equal to total costs
how do you calculate the level of profit from a break even diagram
vertical distance between total revenue and total cost curves
Margin of safety
Actual level of output – Breakeven 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 at end of period – number of leavers/ Number of employees at end of period x 100
Employee costs as 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 plus non-current liabilities x 100
Current ratio
current assets/ current liabilitys
Gearing (%)
Non-current liabilities/ Total equity plus non-current liabilities x 100
capital employed
total equity + non-current liabilities
Payables days
Payables/ Cost of sales x 365
Receivables days
Receivables/ Sales revenue x 365
Inventory turnover
Cost of goods sold/ Average inventories held
Average rate of return (%)
(Net return from project (£)/ number of years)/ Initial cost of project (£) x 100
