Business Formulas

Question 1

What is the formula for revenue(sales or turnover)?

Answer 1

Revenue (Sales or Turnover) =

Selling price per unit × Number of units sold

Question 2

What is the equation for total variable cost?

Answer 2

Variable costs (Total variable costs) = Variable cost per unit × Number of units sold

Question 3

What’s the equation for total costs?

Answer 3

Total costs =

Fixed costs + Variable costs

Question 4

What are the equations for profit?

Answer 4

Total revenue − Total costs
OR
Total contribution − Fixed costs

Question 5

What’s the equation for market capitalisation?

Answer 5

Market capitalisation of a business = Number of issued shares × Current share price

Question 6

What’s the formula for the expected value of a decision with 2 possible outcomes e.g. A&B?

Answer 6

Expected value of a decision with two possible outcomes eg. A & B = (Pay-off of A × probability of A)+ (Pay-off of B × probability of B)

Question 7

What’s the formula for net gain?

Answer 7

Net gain =

Expected value − Initial cost of decision

Question 8

What’s the formula for market share?

Answer 8

Market share(%)= (sales of 1 product or brand business/ total sales in a market) *100

Question 9

What’s the formula for market growth?

Answer 9

Market growth (%) = (change in the size of the market over a period of time/ original size of the market) *100

Question 10

What’s the formula for added value?

Answer 10

Added value= Sales revenue- cost of bought-in goods and services

Question 11

What’s the formula for labour productivity?

Answer 11

Labour productivity = (Output over a time period/ Number of employees)

Question 12

What’s there formula for unit cost(average cost)?

Answer 12

Unit cost = total cost/ number of units of output

Question 13

What’s the formula for capacity utilisation?

Answer 13

(Actual output/maximum possible output)*100

Question 14

What’s the formula for return on investment?

Answer 14

Return on investment = (profit from the investment / cost of investment )*100

Question 15

What’s the formula for gross profit?

Answer 15

Revenue- cost of sales

Question 16

What’s the formula for operating profit?

Answer 16

Gross profit - operating expenses

Question 17

What’s the formula for profit of the year?

Answer 17

Operating profit+ profit from other activities - net finance costs - tax

Question 18

What’s the formula for gross profit margin(%)?

Answer 18

(Gross profit/ revenue )*100

Question 19

What’s the formula for operating profit margins?

Answer 19

(Operating profit/ revenue)*100

Question 20

What’s the formula for variance?

Answer 20

Budgeted variance- actual variance

Question 21

What’s the formula for contribution per unit?

Answer 21

Selling price- variable cost per unit

Question 22

What are the formulas for total contribution?

Answer 22

Total contribution = Contribution per unit × Units sold
Total contribution =
Total revenue − Total variable costs

Question 23

What’s the formula for break even output?

Answer 23

Fixed cost per unit/ contribution per unit

Question 24

What’s the formula for margin of safety?

Answer 24

Actual level of output- break even level of output

Question 25

What’s the formula for labour turnover?

Answer 25

(Number of staff leaving / number of staff employed by the business) *100

Question 26

What’s the formula for employee retention rate?

Answer 26

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

Question 27

What’s the formula for employee costs as a percentage of turnover?

Answer 27

(Employee costs / turnover)*100

Question 28

What’s the formula for labour costs per unit?

Answer 28

(Labour costs/ units of output)

Question 29

What’s the formula for return in capital employed (ROCE)?

Answer 29

(Operating profit/ capital employed) *100 “Where captain employed is total equity + non current liabilities

Question 30

What’s the formula for current ratio?

Answer 30

Current assets / current liabilities

Question 31

What’s the formula for gearing?

Answer 31

(Non current liabilities / capital employed)*100 “ where capital employed is total equity + non current liabilities

Question 32

What’s the formula for payable days?

Answer 32

(Payables/ cost of sales) * 365

Question 33

what's the formula for receivable days?

Answer 33

(receivables/revenue)*365

Question 34

what's the formula for inventory turnover?

Answer 34

(cost of sales/average inventories held)

Question 35

whats's the formula for average rate of return?

Answer 35

(average annual return/initial cost of project)*100

Question 36

what's the formula for net present value (NPV)?

Answer 36

net present value (NPV) = present value - cost of investment

Question 37

how do you calculate present value?

Answer 37

discount factor * expected return

Question 38

how do you calculate Average Rate of return?

Answer 38

total return/ number of years -if its as a percentage then multiply it by 100