Business Formulas Flashcards
(14 cards)
What is the formula for Total Costs?
TC (total cost) = TFC (total fixed costs) + TVC (total variable costs)
TFC refers to costs that do not change with the level of output, while TVC varies with production volume.
How is Revenue calculated?
Revenue = price × quantity
Revenue represents the total income generated from sales before any expenses are deducted.
What is the formula for the Break Even point in units?
Break even point in units = fixed cost ÷ (sales price − variable cost)
This calculation determines the number of units that must be sold to cover all costs.
How do you calculate the Break Even point in costs/revenue?
Break even point in costs/revenue = break even point in units × sales price
This figure represents the total revenue required to cover fixed and variable costs.
What is the Margin of Safety?
Margin of safety = actual or budgeted sales − break even sales
It indicates how much sales can drop before a business reaches its break-even point.
How is Interest on loans calculated in percentage?
Interest (on loans) in % = ((total repayment − borrowed amount) ÷ borrowed amount) × 100
This formula calculates the interest as a percentage of the original loan amount.
What is the formula for Net Cash-flow?
Net cash-flow = cash inflows − cash outflows in a given period
It measures the net amount of cash being transferred into and out of a business.
What is the Opening balance?
Opening balance = closing balance of the previous period
This represents the amount available at the start of a new period.
How is the Closing balance calculated?
Closing balance = opening balance + net cash-flow
This shows the total amount available at the end of a period.
What is Gross Profit?
Gross profit = sales revenue − cost of sales
It measures the profit a company makes after deducting the costs associated with making and selling its products.
How is Gross Profit Margin calculated?
Gross profit margin (%) = (gross profit ÷ sales revenue) × 100
This percentage indicates how much of every dollar of sales is gross profit.
What is Net Profit?
Net profit = gross profit − other operating expenses and interest
It represents the actual profit after all expenses have been deducted.
How is Net Profit Margin calculated?
Net profit margin (%) = (net profit ÷ sales revenue) × 100
This shows the percentage of revenue that remains as profit after all expenses.
What is the formula for Average Rate of Return?
Average rate of return (%) = (average annual profit ÷ cost of investment) × 100
Average annual profit is calculated as total profit ÷ number of years.
