Equations

Question 1

What is the Revenue equation?

Answer 1

Price per unit × Quantity sold

Question 2

What are the two Profit equations?

Answer 2

1) Total revenue − Total costs
2) Total contribution − Fixed costs

Question 3

What is the Market Capitalisation equation?

Answer 3

Number of issued shares × Current share price

Question 4

What is the Expected Value (2 outcomes) equation?

Answer 4

(Pay-off A × Probability A) + (Pay-off B × Probability B)

Question 5

What is the Net Gain equation?

Answer 5

Expected value − Initial cost

Question 6

What is the Labour Cost per Unit equation?

Answer 6

Labour costs ÷ Units of output

Question 7

What is the Employee Costs as % of Turnover equation?

Answer 7

(Employee costs ÷ Turnover) × 100

Question 8

What is the Retention Rate equation?

Answer 8

(Employees remained ÷ Employees at start) × 100

Question 9

What is the Labour Turnover equation?

Answer 9

(Staff leaving ÷ Staff employed) × 100

Question 10

What is the Margin of Safety equation?

Answer 10

Actual Output − Breakeven Output OR Forecast Sales − Breakeven point

Question 11

What are the Total Contribution equations?

Answer 11

1) Contribution per unit × Units sold
2) Total revenue − Total variable costs

Question 12

What is the Contribution per Unit equation?

Answer 12

Selling price − Variable cost per unit

Question 13

What is the Break-even Output equation?

Answer 13

Fixed costs ÷ Contribution per unit

Question 14

What is the Variance equation?

Answer 14

Budgeted figure − Actual figure

Question 15

What is the Net Profit Margin equation?

Answer 15

(Net profit ÷ Sales) × 100

Question 16

What is the Operating Profit Margin equation?

Answer 16

(Operating profit ÷ Revenue) × 100

Question 17

What is the Gross Profit Margin equation?

Answer 17

(Gross profit ÷ Revenue) × 100

Question 18

What is the Profit for Year equation?

Answer 18

Operating profit + Other profit − Net finance costs − Tax

Question 19

What is the Operating Profit equation?

Answer 19

Gross profit − Operating expenses

Question 20

What is the Gross Profit equation?

Answer 20

Revenue − Cost of sales

Question 21

What is the Return on Investment (ROI) equation?

Answer 21

(Operating profit ÷ Capital invested) × 100

Question 22

What is the Capacity Utilisation equation?

Answer 22

(Actual output ÷ Max possible output) × 100

Question 23

What is the Unit Costs (Average Costs) equation?

Answer 23

Total costs ÷ Units of output

Question 24

What is the Labour Productivity equation?

Answer 24

Output ÷ Number of employees

Question 25

What is the Added Value equation?

Answer 25

Sales revenue − Cost of bought-in goods/services

Question 26

What is the Market Share equation?

Answer 26

(Product sales ÷ Total market sales) × 100

Question 27

What is the Market Growth equation?

Answer 27

(Change in market size ÷ Original market size) × 100

Question 28

What is the Variable Costs equation?

Answer 28

Cost per unit × Number of units

Question 29

What is the Fixed Costs equation?

Answer 29

Total cost − (Variable cost per unit × Units produced)

Question 30

What is the Total Costs equation?

Answer 30

Fixed costs + Variable costs

Question 31

What is the Working Capital equation?

Answer 31

Current assets − Current liabilities

Question 32

What is the Net Assets equation?

Answer 32

Net current assets + Non-current assets − Long-term liabilities

Question 33

What is the Net Cash Flow equation?

Answer 33

Inflows − Outflows

Question 34

What is the Secondary Profit equation?

Answer 34

Margin of safety × Contribution per unit

Question 35

What is the Punctuality equation?

Answer 35

(On-time deliveries ÷ Total deliveries) × 100

Question 36

What is the method for calculating all profit stages?

Answer 36

Revenue − Cost of sales = Gross profit − Expenditure = Operating profit − Tax = Net profit

Question 37

What is the Current Ratio equation?

Answer 37

Current assets ÷ Current liabilities

Question 38

What is the Gearing equation?

Answer 38

(Non-current liabilities ÷ [Equity + Non-current liabilities]) × 100

Question 39

What is the ROCE equation?

Answer 39

(Operating profit ÷ Capital employed) × 100

Question 40

What is the Capital Employed equation?

Answer 40

Equity + Non-current liabilities

Question 41

What is the Inventory Turnover equation?

Answer 41

Cost of goods sold ÷ Average inventory held

Question 42

What is the Receivables Days equation?

Answer 42

(Receivables ÷ Revenue) × 365

Question 43

What is the Payables Days equation?

Answer 43

(Payables ÷ Cost of sales) × 365

Question 44

What is the Price Elasticity equation?

Answer 44

% Change in quantity demanded ÷ % Change in price

Question 45

What is the Income Elasticity equation?

Answer 45

% Change in quantity demanded ÷ % Change in income

Question 46

What is the GDP equation?

Answer 46

Consumer spending + Investment + Government spending + (Exports − Imports)

Question 47

What is the Quarterly Moving Average equation?

Answer 47

Sum of 4 quarters ÷ 4

Question 48

What is the Average Rate of Return (ARR) equation?

Answer 48

(Average annual profit ÷ Cost of investment) × 100

Question 49

What is the Average Annual Profit equation?

Answer 49

Total profit ÷ Number of years

Question 50

What is the Payback Period equation and its unit?

Answer 50

Income required ÷ Net cash flow from next year (×12) Measured in: months or years

Question 51

What is the Average Cost per Unit equation?

Answer 51

Total production costs ÷ Output

Question 52

What is the Acid Test Ratio equation?

Answer 52

(Current assets − Inventory) ÷ Current liabilities