# Equations for 2022 exam Flashcards

1
Q

Market share

A

Sales of a business ÷ Total sales in the market) x 100

2
Q

Percentage change

A

(Difference between the two numbers ÷ original number) x 100

3
Q

Cost plus pricing =

A

cost per product + (mark-up x unit cost)
E.g. a handbag is £80 plus 25% mark up.
£80 + (25% x £80) = £80 + £20 = £100

4
Q

Sales volume =

A

total number of units sold over a period of time

5
Q

Sales revenue =

A

number of units sold x unit price

6
Q

Total variable costs =

A

number of units sold x variable cost per unit

7
Q

Total costs =

A

Fixed costs + variable costs

8
Q

Gross profit =

A

Sales revenue minus cost of sales

9
Q

Operating profit =

A

10
Q

Net profit =

A

Operating Profit +/- Tax, finance costs (purchase or sales of assets)

11
Q

Opening balance =

A

previous months closing balance

12
Q

Closing balance =

A

Opening balance +/- Net cash flow

13
Q

Net cash flow =

A

Total inflows – Total outflows

14
Q

Break-even =

A

Fixed costs ÷ Contribution per unit

15
Q

Contribution per unit =

A

Selling price per unit – Variable cost per unit

16
Q

Total contribution =

A

Contribution per unit x Number of units sold

17
Q

Margin of safety =

A

Actual output – break even output

18
Q

Budget Variance =

A

Actual – Budget

19
Q

Gross profit margin =

A

(Gross profit ÷ Sales revenue) x 100

20
Q

Operating profit margin =

A

(Operating profit ÷ Sales revenue) x 100

21
Q

Net profit margin =

A

(Net profit ÷ Sales revenue) x 100

22
Q

Return on capital employed (ROCE) =

A

Operating/Net profit ÷ Capital employed) x 100

23
Q

Working capital =

A

current assets –current liabilities

24
Q

Current ratio =

A

= Current assets ÷ current liabilities

25
Q

Acid test ratio =

A

(Current assets – inventory) ÷ current liabilities

26
Q

Gearing ratio =

A

(Long term liabilities ÷ Capital employed) x 100

27
Q

Productivity (labour) =

A

Output per period (units) ÷ Number of employees in that period

28
Q

Capacity utilisation =

A

(Actual level of output ÷ Maximum possible output) x 100

29
Q

3 point moving average

A
2. Divide by 3 to get the average
3. Repeat for each period going down
This will create a trend line - smoothing out the peaks and falls
30
Q

4 point moving average

A

We would take the Jan – April figures and add them together (4680+2970+2610+4950 = 15,210)
We would then take Feb – May figures and add them together (2970+2610+4950+3240 = 13,770 )
Then ADD the two totals together and DIVIDE by 8 (15,219+13,770) ÷ 8 = 3623.26 (2dp)

31
Q

Payback – This refers to the amount of time it takes for a project to recover its initial outlay (investment).

How would you work out the payback for Proposal 2

Cash flows (£000s)

Proposal 1

Proposal 2

Proposal 3

Proposal 4

Year 0

• £120
• £95
• £80
• £160

Year 1

£80

£10

£30

£30

Year 2

£60

£40

£40

£50

Year 3

£40

£40

£30

£90

Year 4

£20

£60

£30

£80

Year 5

£40

£50

£20

£60

A
• Its going to cost the business £95,000 to get this project up and running
• Year 1 the project makes £10,000
• Year 2 the project makes £40,000
• Year 3 the project makes £40,000
• So far it has paid back £90,000

Now we need £5,000 more from year 4 so….

£5,000 x 12 = 0.9 so 1 month

£60,000

32
Q

Average rate of return (ARR) =

Cash flows (£000s)

Proposal 1

Proposal 2

Proposal 3

Proposal 4

Year 0

• £120
• £95
• £80
• £160

Year 1

£80

£10

£30

£30

Year 2

£60

£40

£40

£50

Year 3

£40

£40

£30

£90

Year 4

£20

£60

£30

£80

Year 5

£40

£50

£20

£60

A

Average net return per year ÷ Project costs (initial investment amount) X 100

So for the above example Proposal 2:

Average net cash flow is the sum of year 1 to year 5 net cash flow figures:

£10, 000+£40,000+£40,000+£60,000+£50,000 = £200,000 Then take off investment £95,000 leaves £105,000 net return

Divided by 5 gives us the net return per annum : 105,000 ÷ 5 = £21,000

Initial investment is £95,000

ARR = (£21,000 ÷ £95,000) x 100 ARR = 22.11%

33
Q

Net Present Value (NPV) =

A

Each year net cash flow x discount factor (you will be told what to use)
Add the discounted net cash flows for each year