Formulas

Question 1

Revenue

Answer 1

Also known as sales/turnover

Selling price per unit x Number of units sold

Question 2

Variable cost

Answer 2

Variable cost per unit x number of units sold

Question 3

Total costs

Answer 3

Fixed costs + Variable costs

Question 4

Profit

Answer 4

Total revenue - Total costs

OR

Total contribution - Fixed costs

Question 5

Market capitalisation

Answer 5

Number of shares issued x share price

Question 6

Expected value of a decision with two possible outcomes eg A & B

Answer 6

(Pay off of A x probability of A) + (Pay off of B x probability of B)

Question 7

Net Gain

Answer 7

Expected value - Initial cost of decision

Question 8

Market growth (%)

Answer 8

(Change in size of market over a period)/
(Original size of market)

X100

Question 9

Market share (%)

Answer 9

(Sales of one product OR Brand OR Business) / (Total sales in the market)

x100

Question 10

Added value

Answer 10

Sales revenue - costs of bought-in goods and services

Question 11

Labour productivity

Answer 11

(Output over a time period)/(Number of employees)

Question 12

Unit costs

Answer 12

(Total costs) / (Number of units of output)

Question 13

Capacity utilisation (%)

Answer 13

(Actual output) / (Maximum possible output)

x100

Question 14

Return on investment (%)

Answer 14

(Profit from the investment) / (Cost of the investment)

x100

Question 15

Gross profit

Answer 15

Revenue - Cost of sales

Question 16

Operating profit

Answer 16

Gross profit - Operating expenses

Question 17

Profit for the year

Answer 17

Operating profit + profit from other activities - Net finance costs - Tax

Question 18

Gross profit margin (%)

Answer 18

Gross profit / revenue x100

Question 19

Operating profit margin (%)

Answer 19

Operating profit / Revenue x100

Question 20

Profit for the year margin (%)

Answer 20

Profit for the year / revenue x 100

Question 21

Variance

Answer 21

Budgeted figure - actual figure

Question 22

Contribution per unit

Answer 22

Selling price - variable costs per unit

Question 23

Total contribution

Answer 23

Contribution per unit x units sold

OR

Total revenue - Total variable costs

Question 24

Break even output

Answer 24

Fixed costs / contribution per unit

Question 25

Margin of safety

Answer 25

Actual level of output - Break even level of output

Question 26

Labour turnover (%)

Answer 26

(Number of staff leaving) / (Number of staff employed by the business) x100

Question 27

Employee retention rate (%)

Answer 27

(Number of employees who remained with the business for the whole period of time) / (Number of employees at start of the time period) x100

Question 28

Employee cost as percentage of turnover

Answer 28

Employee costs / turnover x100

Question 29

Labour cost per unit

Answer 29

Labour costs / units of output

Question 30

Return on capital employed (ROCE) (%)

Answer 30

(Operating profit) / (Total equity + Non-current liabilities x100

Question 31

Current ratio

Answer 31

Current assets / current liabilities

Question 32

Gearing (%)

Answer 32

(Non current liabilities) / (Total equity + non-current liabilities) x100

Question 33

Payables days

Answer 33

Payables / Cost of sales x365

Question 34

Receivables days

Answer 34

Receivables / revenue x365

Question 35

Inventory turnover

Answer 35

Cost of sales / Average inventories held

Question 36

Average rate of return (%)

Answer 36

(Average annual return) / (Initial cost of project) x100