Business Theme 2 Equations Flashcards
(22 cards)
Total revenue
Sales price x quantity
Total variable costs
Variable cost per unit x quantity
Total costs
Total variable costs + total fixed costs
Net cash flow
Inflows - outflows
Opening balance
Closing balance from previous month
Closing balance
Opening balance that month + net cash flow
Contribution per unit
Sales price - variable cost per unit
Break even output
Total fixed costs / contribution per unit (expressed as the number of units i.e output NOT as a monetary amount)
Total contribution
Contribution per unit x quantity
Margin of safety
Actual/forecast output - break even output
Profit
Total revenue - total OR
Total contribution - total fixed costs OR
Margin of safety x contribution per unit
Variance
Actual figures - budgeted figures
Think about whether the actual are better than the budgeted or worse, if better ‘favourable’ if worse ‘adverse’
Profit margin
Profit/ revenue x 100 profit margin %
Gross profit
Revenue - cost of sales
Operating profit
Revenue - cost of sales and operating expenses
Net profit/ profit for year
Revenue - costs of sales and operating expenses
Working capital
Currents Assets - current liabilities (current is money that will be received or paid within 12 months)
Current ratio
Current assets/ current liabilities : 1
Rule of thumb 1.5 is good
Acid test ratio
Current assets - inventory/ current liabilities : 1
Productivity
Total output in time period/ number of inputs = productivity per input in time period
Capacity utilisation
Actual output / maximum possible output x 100 = capacity utilisation %
Stock control diagram
Interpret diagram
- usage rates
- lead time
- reorder level and buffer stock level
