Flashcards in Business Equations & Formulas Deck (40):

1

## How do you work out the TOTAL COSTS of a business?

### Total costs = Fixed costs + Variable costs

2

## What are the 2 methods a business can use to calculate their PROFIT?

###
1) Profit = Total revenue - Total costs

2) Profit = Total contribution - Fixed costs

3

## How do you work out the TOTAL VARIABLE COSTS of a business?

### Total Variable Costs = Variable cost per unit x Number of units sold

4

## How do you work out a businesses SALES REVENUE OR TURNOVER?

### Sales revenue or Turnover = Selling price per unit x Number of units sold

5

## How do you work out the MARKET CAPITALISATION OF A BUSINESS?

### Market Capitalisation of a business = Number of issued shares x Current share price

6

## How do you work out the EXPECTED VALUE OF A DECISION WITH TWO POSSIBLE OUTCOMES (A and B)?

###
Expected value of a decision with two possible outcomes (A and B) = (Pay-off of A x probability of A) + (Pay-off of B x probability of B)

Note: Probability of A + Probability of B = 1.0

7

## How do you work out the NET GAIN in a DECISION TREE?

### In a decision tree Net gain = Expected value - Initial cost of decision

8

## How do you work out the MARKET GROWTH (%) IN YEAR 'X'?

### Market growth (%) in year 'X' = Change in the size of the market between year (X-1) and year X ÷ Size of the market in year (X-1) X 100

9

## How do you work out the SALES GROWTH (%) IN YEAR 'X'?

### Sales growth (%) in year 'X' = Change in sales of product or business between year (X-1) and year X ÷ Sales of product or business in year (X-1) X 100

10

## How does a business work out their MARKET SHARE (%)?

### Market Share (%) = Sales of one product (OR brand OR business) ÷ Total sales in the market X 100

11

## How does a firm work out their PRICE ELASTICITY OF DEMAND (PED)?

### Price elasticity of demand (PED) = Percentage change in quantity demanded ÷ Percentage change in price X 100

12

## How do you work out the ADDED VALUE (VALUE ADDED)?

### Added value (value added) = Sales revenue - Costs of brought-in goods and services

13

## How does a business work out their LABOUR PRODUCTIVITY?

### Labour productivity = Output per time period ÷ Number of employees

14

## How does a business work out their UNIT COSTS (AVERAGE COSTS)?

### Unit costs (average costs) = Total costs of production ÷ Number of units of output produced

15

## How do you find out the CAPACITY UTILISATION (%) of a business?

### Capacity utilisation (%) = Actual output in a given time period ÷ Maximum possible output in a given time period X 100

16

## How do you work out the RETURN ON INVESTMENT (%)?

### Return on investment (%) = Return on investment (£) ÷ Cost of the investment (£) X 100

17

## How do you work out the GROSS PROFIT of a business?

### Gross profit = Sales Revenue - Cost of Sales

18

## How does a business work out their OPERATING PROFIT?

### Operating profit = Sales Revenue - Cost of Sales - Operating Expenses

19

## How does a business work out their PROFIT FOR YEAR?

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

20

## How do you work out the CONTRIBUTION PER UNIT of a business?

### Contribution per unit = Selling price - Variable costs per unit

21

## What are the 2 methods a firm can use to work out the TOTAL CONTRIBUTION?

###
Total contribution = Contribution per unit x Units produced (or sold)

OR

Total contribution = Total revenue - Total variable costs

22

## How do businesses work out their BREAK-EVEN OUTPUT?

### Break-even output = Fixed costs (£) ÷ Contribution per Unit (£)

23

## How do you work out the BREAK-EVEN OUTPUT on a BREAK-EVEN CHART? (Say and Draw)

### On a break-even chart: break-even output is the level of output at which TOTAL REVENUE equals TOTAL COSTS

24

## How do you work out the LEVEL OF PROFIT AT A GIVEN LEVEL OF OUTPUT on a BREAK-EVEN CHART? (Say and Draw)

### On a break-even chart the level of profit at a given level of output is the VERTICAL DISTANCE between the TOTAL REVENUE LINE and the TOTAL COST LINE

25

## How do you work out the MARGIN OF SAFETY of a business?

### Margin of safety = Actual level of output - Breakeven level of output

26

## How do firms work out their GROSS PROFIT MARGIN (%)?

### Gross profit margin (%) = Gross Profit ÷ Sales Revenue X 100

27

## How do firms work out their OPERATING PROFIT MARGIN (%)?

### Operating profit margin (%) = Operating Profit ÷ Sales Revenue X 100

28

## How do firms work out their PROFIT FOR YEAR MARGIN (%)?

### Profit for year margin (%) = Profit for the Year ÷ Sales Revenue X 100

29

## How do firms work out their LABOUR TURNOVER (%)?

### Labour turnover (%) = Number of staff leaving during the year ÷ Average number of staff employed by the business during the year X 100

30

## How do firms work out their EMPLOYEE RETENTION RATE (%)?

### Employee retention rate (%) = Number of staff who stayed throughout the year ÷ Average number of staff employed by the business during the year X 100

31

## How do you work out the EMPLOYEE COSTS AS PERCENTAGE OF TURNOVER?

### Employee costs as percentage of turnover = Employee Costs ÷ Sales Revenue X 100

32

## How do firms work out their LABOUR COST PER UNIT?

### Labour cost per unit = Labour costs ÷ Units of output

33

## How do you work out the CAPITAL EMPLOYED?

### Total equity + Non-current liabilities = Capital Employed

34

## How do businesses work out their RETURN ON CAPITAL EMPLOYED (ROCE) (%)?

### Return on capital employed (ROCE) (%) = Operating profit ÷ Total equity + non-current liabilities X 100

35

## How do businesses work out their CURRENT RATIO?

### Current Ratio = Current assets ÷ Current liabilities

36

## How do businesses work out their GEARING %?

### Gearing % = Non-current liabilities ÷ Total equity + non-current liabilities

37

## How do businesses work out the AMOUNT OF DAYS IT'LL TAKE TO PAY OFF THEIR PAYABLES (CREDITORS)?

### Payables (Creditors) Days = Payables ÷ Cost of Sales X 365

38

## How do businesses work out the AMOUNT OF DAYS IT'LL TAKE RECEIVABLES (DEBTORS) TO PAY THE BUSINESS?

### Receivables (Debtors) Days = Receivables ÷ Cost of Sales X 365

39

## How do you find out a businesses INVENTORY TURNOVER?

### Inventory Turnover = Cost of goods sold ÷ Average inventories held

40