Formulae and Key Data

Question 1

Total costs

Answer 1

Fixed costs + Variable costs

Question 2

Profit

Answer 2

Total revenue - Total costs

Total contribution - Fixed costs

Question 3

Total variable costs

Answer 3

Variable cost per unit x Number of units sold

Question 4

Sales revenue/Turnover

Answer 4

Selling price per unit * Number of units sold

Question 5

Market capitalisation of a business

Answer 5

Number of issued shares * Current share price

Question 6

Net gain in a Decision Tree

Answer 6

Expected value - Initial cost of decision

Question 7

Expected value of a decision

Answer 7

Pay-off of the decision * probability

Question 8

Total expected value

Answer 8

All expected values of a decision path, such that the probability of those expected values all add up to one.

Question 9

Market size volume

Answer 9

Quantity of goods produced in a particular market over a period of time, usually one year

Question 10

Market size

Answer 10

The total sales revenue generated from selling all goods and services produced in a particular market over a period of time, usually one year.

Question 11

Sales volume

Answer 11

Quantity of goods and services produced by a particular business over a period of time

Question 12

Sales value

Answer 12

Total sales revenue over a period of time

Question 13

Market growth (%) in year (X)

Answer 13

Change in the size of the market in year X/ Size of market in the year before X

Question 14

Sales growth (%) in year (X)

Answer 14

Change in sales of products in year X/Sales of product in the year before X

Question 15

Market share (%)

Answer 15

Sales of product/Total sales in the market

Question 16

Price elasticity of demand

Answer 16

Percentage change in quantity demanded/ Percentage change in price

-1 <= PED <= 0 - Price inelastic
PED < -1 - Price elastic

Question 17

Added value (value added)

Answer 17

Sales revenue - cost of bought-in goods

Question 18

Labour productivity

Answer 18

Output per time period/ Number of employees

Question 19

Unit cost (average costs)

Answer 19

Total costs of production/ number of units of output produced

Question 20

Capacity utilisation (%)

Answer 20

Actual output in a given time period/ max potential output in a given time period *100

Question 21

Return on investment (%)

Answer 21

Return on investment (£)/ Cost of investment (£) * 100

Question 22

Gross profit

Answer 22

Sales Revenue - Cost of sales

Question 23

Operating Profit

Answer 23

Gross Profit - Operating Costs

Question 24

Profit for the Year

Answer 24

Operating Profit - Net costs - Tax

Question 25

Variance

Answer 25

The difference between the actual figure and budgeted figure. This can apply to both costs aned profits A favourable variance would result in higher profits than the budgeted figure. An adverse variance would reflect that the profit is lower than the budget

Question 26

Contribution per unit

Answer 26

Selling price - Variable costs per unit

Question 27

Total contribution

Answer 27

Contribution per unit * Units produced or sold OR Revenue - Variable costs

Question 28

Break-even output

Answer 28

Fixed costs / Contribution per unit

Question 29

How do you find the break-even output on a chart?

Answer 29

It is the point in which Total Revenue equals Total Costs

Question 30

How do you find the level of profit?

Answer 30

The level of profit at a given output is the vertical distance between the total revenue and total cost line

Question 31

Margin of safety

Answer 31

Actual level of output - Breakeven level of output

Question 32

Gross profit margin (%)

Answer 32

Gross profit / Sales revenue *100

Question 33

Operating profit margin (%)

Answer 33

Operating profit/ Sales revenue * 100

Question 34

Profit for the year margin (%)

Answer 34

Profit for the year/Sales revenue * 100

Question 35

Labour turnover (%)

Answer 35

Number of staff leaving during the year / Average number of staff employed by the business

Question 36

Employee retention rate (%) for a time period

Answer 36

Number of staff leaving during the year/ Average number of staff employed by the business during the year

Question 37

Employee costs as a percentage of turnover

Answer 37

Employee costs/ Sales turnover * 100

Question 38

Labour cost per unit

Answer 38

Labour costs/ Units of output

Question 39

ROCE/ Return on Capital Employed

Answer 39

Operating profit * 100 / Total equity + non-current liabilities OR Operating profit/capital employed * 100

Question 40

Capital employed

Answer 40

Total equity + non-current liabilities

Question 41

Current ratio

Answer 41

Current assets / Current liabilities

Question 42

Gearing (%)

Answer 42

Non-current liabilities *100 / Capital employed OR Non-current liabilities*100/Total equity + non-current liabilities

Question 43

Payables days

Answer 43

Payables*365/ Cost of sales Payables = creditors

Question 44

Receivable days

Answer 44

Receivables *365/ Sales revenue Receivables = debtors

Question 45

Inventory turnover

Answer 45

Cost of goods sold/ Average inventories held

Question 46

Average rate of return

Answer 46

Net return over a period or time or from something specific/Cost of the project or cost over time.