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Question 1

What is the formula for Revenue (Sales or Turnover)?

Answer 1

Selling price per unit x Number of units sold

Question 2

How do you calculate Variable costs (Total variable costs)?

Answer 2

Variable cost per unit x Number of units sold

Question 3

What is the formula for Total costs?

Answer 3

Fixed costs + Variable costs

Question 4

How is Profit calculated?

Answer 4

Total revenue - Total costs OR Total contribution - Fixed costs

Question 5

What is the formula for Market capitalisation of a business?

Answer 5

Number of issued shares x Current share price

Question 6

How is Expected value of a decision with two possible outcomes calculated?

Answer 6

[Pay-off of A x probability of A] + [Pay-off of B x probability of B]

Question 7

What is the formula for Net gain?

Answer 7

Expected value - Initial cost of decision

Question 8

How is Market growth (%) calculated?

Answer 8

Change in the size of the market over a period / Original size of the market x 100

Question 9

What is the formula for Market share (%)?

Answer 9

Sales of one product OR brand OR business / Total sales in the market x 100

Question 10

How is Added value calculated?

Answer 10

Sales revenue - costs of bought-in goods and services

Question 11

What is the formula for Labour productivity?

Answer 11

Output over a time period / Number of employees

Question 13

What is the formula for Unit costs (average costs)?

Answer 13

Unit costs (average costs) = Total costs / Number of units of output

Question 14

What is the formula for Capacity utilisation (%)?

Answer 14

Capacity utilisation (%) = (Actual output / Maximum possible output) × 100

Question 15

What is the formula for Return on investment (%)?

Answer 15

Return on investment (%) = (Profit from the investment (£) / Cost of the investment (£)) × 100

Question 16

What is the formula for Gross Profit?

Answer 16

Gross Profit = Revenue - Cost of Sales

Question 17

What does Profit from Operations equal?

Answer 17

Profit from Operations = Operating profit = Gross profit - Operating Expenses

Question 18

What is the formula for Profit for year?

Answer 18

Profit for year = Operating profit + Profit from other activities - Net finance costs - Tax

Question 19

What is the formula for Gross profit margin (%)?

Answer 19

Gross profit margin (%) = (Gross profit / Revenue) × 100

Question 20

What is the formula for Profit from operations margin (Operating profit margin %)?

Answer 20

Profit from operations margin = Operating profit margin (%) = (Operating profit / Revenue) × 100

Question 21

What is the formula for Profit for year margin (%)?

Answer 21

Profit for year margin (%) = (Profit for year / Revenue) × 100

Question 22

What is the formula for Variance?

Answer 22

Variance = Budgeted figure - actual figure

Question 24

What is the formula for Contribution per unit?

Answer 24

Contribution per unit = Selling price - Variable costs per unit

Question 25

How is Total contribution calculated?

Answer 25

Total contribution = Contribution per unit x Units sold OR Total contribution = Total revenue - Total variable costs

Question 26

What is the formula for Break-even output?

Answer 26

Break-even output = Fixed costs / Contribution per unit

Question 27

How is Margin of safety defined?

Answer 27

Margin of safety = Actual level of output - Break-even level of output

Question 28

What is the formula for Labour turnover (%)?

Answer 28

Labour turnover (%) = (Number of staff leaving / Number of staff employed by the business) x 100

Question 29

How is Employee retention rate (%) calculated?

Answer 29

Employee retention rate (%) = (Number of employees who remained with the business for the whole period of time / Number of employees at start of the time period) x 100

Question 30

What is the formula for Employee costs as percentage of turnover?

Answer 30

Employee costs as percentage of turnover = (Employee costs / Turnover) x 100

Question 31

How is Labour cost per unit calculated?

Answer 31

Labour cost per unit = Labour costs / Units of output

Question 32

What is the formula for Return on capital employed (ROCE) (%)?

Answer 32

Return on capital employed (ROCE) (%) = (Operating profit / (Total equity + non-current liabilities)) x 100

Question 33

What does Total equity + non-current liabilities represent?

Answer 33

Total equity + non-current liabilities = capital employed

Question 35

What is the formula for the current ratio?

Answer 35

Current ratio = Current assets / Current liabilities ## Footnote The current ratio measures a company's ability to pay short-term obligations.

Question 36

How is gearing (%) calculated?

Answer 36

Gearing (%) = (Non-current liabilities / (Total equity + non-current liabilities)) x 100 ## Footnote Gearing indicates the proportion of a company's capital that comes from debt.

Question 37

What does total equity + non-current liabilities represent?

Answer 37

Capital employed ## Footnote This is the total amount of capital used for the acquisition of profits.

Question 38

What is the formula for payables days?

Answer 38

Payables days = (Payables / Cost of sales) × 365 ## Footnote Payables days measure how long it takes a company to pay its suppliers.

Question 39

How is receivables days calculated?

Answer 39

Receivables days = (Receivables / Revenue) × 365 ## Footnote This metric indicates how long it takes a company to collect payment from its customers.

Question 40

What is the formula for inventory turnover?

Answer 40

Inventory turnover = Cost of sales / Average inventories held ## Footnote This ratio measures how many times a company's inventory is sold and replaced over a period.

Question 41

How is the average rate of return (%) determined?

Answer 41

Average rate of return (%) = (Average annual return (£) / Initial cost of project (£)) × 100 ## Footnote This metric evaluates the profitability of an investment relative to its cost.