Forumulas

Question 1

Break-even point

Answer 1

Fixed costs / contribution per unit

Contribution = SP per unit - variable costs per unit

Question 2

Profit margins

Answer 2

Net profit margin = net profit / revenue x 100

Gross profit margin = gross profit / revenue x100

Improve: raising prices or lowering cost

Question 3

ROCE

Answer 3

Net profit / capital employed x100

Analyse profitability

How much money is made compared to how much is put into business

good 20%

Question 4

Labour productivity

Answer 4

Output / no. Of employees

Question 5

Labour turnover

Answer 5

no. Of staff leaving / average number of staff employed

Question 6

Capacity utilisation

Answer 6

Actual Output / Max possible output x100

Question 7

Price elasticity

Answer 7

% change in quantity demand / % change in price

More than 1 = price elastic DRASTIC (raise price = demand decreases) (decrease price = demand increases)

Less than 1 = price inelastic affects little

Question 8

Income elasticity of demand

Answer 8

% change in quantity demanded / % change in real incomes

Inferior less than one
Normal income = less than 1

Luxury good = More than 1

Question 9

Current ratio

Answer 9

Current assets / current liabilities :1

Cash has to pay for every £1 in short term debt

Question 10

Gearing

Answer 10

NCL / (total equality + NCL) x100

How much business is dependant/ financed with long term debt

Question 11

Payable days

Answer 11

Paybles / COS x365

Question 12

Receivables

Answer 12

Receivables / Revenue x365

Question 13

Inventory turnover

Answer 13

COS / average inventory held