Business Calculations

Question 1

How do you calculate fixed costs?

Answer 1

Fixed costs + Variable costs

Question 2

How do you calculate profit?

Answer 2

Total Revenue - Total Costs
OR
Total contribution - Fixed Cost

Question 3

How do you calculate market capitalisation?

Answer 3

Number of Shares X Current share volume

Question 4

How do you calculate sales revenue/turnover?

Answer 4

Selling price X Number of units sold

Question 5

How do you calculate the expected value of a decision?

Answer 5

• Two possible outcomes - A & B = (Pay-off of A X probability of A) + (Pay-off of B X probability of B)
• N.B. Probability of A + Probability of B = 1.0

Question 6

How do you calculate net gain within a decision tree?

Answer 6

Expected value - Initial cost of decision

Question 7

How do you calculate market size volume?

Answer 7

The quantity of goods and services produced in a particular market over a period of time usually one year

Question 8

How do you calculate market size?

Answer 8

The total sales revenue (from selling all of the goods and services) produced in a particular market over a period of time (usually one year)

Question 9

How do you calculate sales volume?

Answer 9

The quantity of goods and services produced by a particular business over a period of time (usually one year)

Question 10

How do you calculate sales value?

Answer 10

The total sales revenue of a particular business over a period of time usually (one year)

Question 11

How do you calculate market growth (%)?

Answer 11

(Change in size of market between years / Size of the market in year) X 100

Question 12

How do you calculate sales growth (%)?

Answer 12

(Change in sales of product or business between years / Sales of product or business in year) x 100

Question 13

How do you calculate market share %?

Answer 13

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

Question 14

How do you calculate price elasticity of demand?

Answer 14

(Percentage change in quantity demanded / Percentage change in price) x 100

Question 15

How do you calculate added value?

Answer 15

Sales revenue - costs of bought-in goods and services

Question 16

How do you calculate labour productivity?

Answer 16

Output per time period / Number of employees

Question 17

How do you calculate unit costs?

Answer 17

Total costs of production / Number of units of output produced

Question 18

How do you calculate capacity utilisation (%)?

Answer 18

Actual output in a given time period / Maximum possible output in a given time period

Question 19

How do you calculate return on investment (%)?

Answer 19

Return on investment (£) / Cost of the investment (£)

Question 20

How do you calculate gross profit?

Answer 20

Sales Revenue - Cost of Sales

Question 21

How do you calculate profit from operations/ operating profit?

Answer 21

Sales Revenue - Cost of Sales - Operating Expenses

Question 22

How do you calculate profit for the year?

Answer 22

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

Question 23

How do you calculate variance?

Answer 23

The difference between an actual and a budgeted figure.
* Favourable variance results in profits being higher than forecast
* Adverse variance results in profits being lower than forecast

Question 24

How do you calculate contribution per unit?

Answer 24

Selling price - Variable costs per unit

Question 25

How do you calculate total contribution?

Answer 25

Contribution per unit **×** Units produced or sold OR Total revenue **-** Total variable costs

Question 26

How do you calculate break-even output?

Answer 26

Fixed costs **/** Contribution per unit

Question 27

On a break even chart where can you find break- even output?

Answer 27

The level of output at which Total Revenue equals Total Costs

Question 28

On a break even chart where can you find the level of profit at a given level of output?

Answer 28

The vertical distance between the Total Revenue line and the Total Cost line

Question 29

How do you calculate margin of safety?

Answer 29

Actual level of output **-** Breakeven level of output

Question 30

How do you calculate gross profit margin (%)?

Answer 30

(Gross profit **/** Sales revenue) **x** 100

Question 31

How do you calculate profit from operations margin/ operating profit margin (%)?

Answer 31

(Operating profit **/** Sales revenue) **x** 100

Question 32

How do you calculate profit from the year margin?

Answer 32

(Profit for year **/** Sales revenue) **x** 100

Question 33

How do you calculate labour turnover (%)?

Answer 33

(Number of staff leaving during the year **/** Average number of staff employed by the business during the year) **x** 100

Question 34

How do you calculate employee retention rate (%) for a particular time period?

Answer 34

(Number of staff leaving during the year **/** Average number of staff employed by the business during the year) **x** 100

Question 35

How do you calculate employee costs as percentage of turnover?

Answer 35

(Employee costs **/** Sales turnover) **x** 100

Question 36

How do you calculate labour costs per unit?

Answer 36

Labour costs **/** Units of output

Question 37

How do you calculate the capital employed?

Answer 37

Total equity **+** non-current liabilities

Question 38

How do you calculate return on capital employed (ROCE) (%)?

Answer 38

(Operating profit **/** Total equity **+** non-current liabilities) **x** 100

Question 39

How do you calculate current ratio?

Answer 39

Current assets **/** Current liabilities

Question 40

How do you calculate gearing %?

Answer 40

(Non-current liabilities **/** Total equity **+** non-current liabilities) **x** 100

Question 41

How do you calculate payable days?

Answer 41

(Payables **/** Cost of sales) **x** 365

Question 42

How do you calculate receivable days?

Answer 42

(Receivables **/** Sales revenue) **x** 365

Question 43

How do you calculate inventory turnover?

Answer 43

Cost of goods sold **/** Average inventories held

Question 44

How do you calculate the average rate of return %?

Answer 44

(Net return from the project (£) or number of years **/** Initial cost of the project (£)) **x** 100