Equations

Question 1

Market size

Answer 1

Number of units sold x price

Question 2

Operating profit

Answer 2

Gross profit - expenses

Question 3

Operating profit margin

Answer 3

Operating profit / sales revenue x100

Question 4

Profit

Answer 4

Total revenue - total costs

Question 5

Profit of the year

Answer 5

Operating profit -interest / tax

Question 6

Profit of the year margins

Answer 6

Profit of the year / sales revenue x100

Question 7

Sales revenue

Answer 7

Selling price x quantity sold

Question 8

Total cost

Answer 8

Fixed cost + variable cost

Question 9

Total revenue

Answer 9

Selling price x quantity sold

Question 10

Variance analysis

Answer 10

Budgeted figure - actual figure

Question 11

Acid test ratio

Answer 11

Liquid assets /current liability

Question 12

Adverse variance

Answer 12

Budgeted figure - actual figure

Question 13

Break even

Answer 13

Tc = tr

Question 14

Break even point

Answer 14

Fixed cost / contribution per unit

Question 15

Capacity Utilisation

Answer 15

Actual output / maximum output x 100

Question 16

Contribution

Answer 16

Selling price - variable cost per unit

Question 17

Current ratio

Answer 17

Current assets : current liabilities

Question 18

Favourable variance

Answer 18

Budgeted - actual figure

Question 19

Gross profit

Answer 19

Sales revenue - cost of sales

Question 20

Gross profit margin

Answer 20

Gross profit/ sales revenue x100

Question 21

Margin of safety

Answer 21

Actual output - break even output

Question 22

Market size

Answer 22

Number of units sold x price

Question 23

Market share

Answer 23

Sales of one firm/ total market sales x100

Question 24

Market growth

Answer 24

Change in size of market / original size x100

Question 25

Price elasticity

Answer 25

% change in quantity demanded / % change in price

Question 26

Total revenue

Answer 26

Price x demand or number of units sold

Question 27

Income elasticity of demand

Answer 27

%change on quantity demand / % change in income

Question 28

labour productivity

Answer 28

total output/ number of workers

Question 29

labour turnover

Answer 29

number of staff leaving / average number of staff x100

Question 30

retention rates

Answer 30

number of employees serving for more than 1 year /average number of staff x100

Question 31

Absenteeism

Answer 31

Number of staff absent per time period/ | Total number of staff days worked per time period x100

Question 32

gearing

Answer 32

Non-current liabilities/ | Total equity + non-current liabilities x100

Question 33

ROCE

Answer 33

Operating profit/ | Total equity + non-current liabilities x100

Question 34

float time

Answer 34

LFT – duration – EST

Question 35

average rate of return

Answer 35

- Total net cash flow / number of years | - Divide average annual income by initial investment x 100

Question 36

Discounted cash flow - Net Present Value

Answer 36

Step 1 : Multiply each net cash inflow by the relevant discount factor Step 2 : add up all the annual NPVs to calculate the total return on the investment

Question 37

payback

Answer 37

Step 1: Calculate during which year the investment cost will be covered Calculate how many months remaining to be paid/already paidx 12 months

Question 38

ARR

Answer 38

Total net cash flow / number of years Divide average annual profit by initial investment x 100

Question 39

discounted cash flow

Answer 39

Step 1 : Multiply each net cash inflow by the relevant discount factor Step 2 : add up all the annual NPVs to calculate the total return on the investment