Formulas

Question 1

What is the formula for Revenue (Sales or Turnover)?

Answer 1

Selling price per unit × Number of units sold

Question 2

How is Variable costs (Total variable costs) calculated?

Answer 2

Variable cost per unit × Number of units sold

Question 3

What is the formula for Total costs?

Answer 3

Fixed costs + Variable costs

Question 4

How is Profit calculated?

Answer 4

Total revenue − Total costs OR Total contribution − Fixed costs

Question 5

What is the formula for Market capitalisation of a business?

Answer 5

Number of issued shares × Current share price

Question 6

How do you calculate the Expected value of a decision with two possible outcomes, A & B?

Answer 6

Pay-off of A × probability of A + Pay-off of B × probability of B

Question 7

What is the formula for Net gain?

Answer 7

Expected value − Initial cost of decision

Question 8

How is Market growth (%) calculated?

Answer 8

Change in the size of the market over a period / Original size of the market × 100

Question 9

What is the formula for Market share (%)?

Answer 9

Sales of one product OR brand OR business / Total sales in the market × 100

Question 10

Define Added value.

Answer 10

Sales revenue − costs of bought-in goods and services

Question 11

What is the formula for Labour productivity?

Answer 11

Output over a time period / Number of employees

Question 12

How are Unit costs (average costs) calculated?

Answer 12

Total costs / Number of units of output

Question 13

What is the formula for Capacity utilisation (%)?

Answer 13

Actual output / Maximum possible output × 100

Question 14

How do you calculate Return on investment (%)?

Answer 14

Profit from the investment (£) / Cost of the investment (£) × 100

Question 15

What is Gross Profit?

Answer 15

Revenue − Cost of Sales

Question 16

How is Profit from Operations (Operating profit) calculated?

Answer 16

Gross profit − Operating Expenses

Question 17

What is the formula for Profit for year?

Answer 17

Operating profit + Profit from other activities − Net finance costs − Tax

Question 18

How is Gross profit margin (%) calculated?

Answer 18

Gross profit / Revenue × 100

Question 19

What is the formula for Profit from operations margin (Operating profit margin)?

Answer 19

Operating profit / Revenue × 100

Question 20

How is Profit for year margin (%) calculated?

Answer 20

Profit for year / Revenue × 100

Question 21

What is the formula for Variance?

Answer 21

Budgeted figure – actual figure

Question 22

How is Contribution per unit calculated?

Answer 22

Selling price − Variable costs per unit

Question 23

What is Total contribution?

Answer 23

Contribution per unit × Units sold OR Total revenue − Total variable costs

Question 24

How do you calculate Break-even output?

Answer 24

Fixed costs / Contribution per unit

Question 25

What is Margin of safety?

Answer 25

Actual level of output − Break-even level of output

Question 26

How is Labour turnover (%) calculated?

Answer 26

Number of staff leaving / Number of staff employed by the business × 100

Question 27

What is the formula for 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 × 100

Question 28

How do you calculate Employee costs as percentage of turnover?

Answer 28

Employee costs / Turnover × 100

Question 29

What is the formula for Labour cost per unit?

Answer 29

Labour costs / Units of output

Question 30

How is Return on capital employed (ROCE)(%) calculated?

Answer 30

Operating profit / Total equity + non-current liabilities × 100

Question 31

What is the formula for Current ratio?

Answer 31

Current assets / Current liabilities

Question 32

How do you calculate Gearing (%)?

Answer 32

Non-current liabilities / Total equity + non-current liabilities × 100

Question 33

What is the formula for Payables days?

Answer 33

Payables / Cost of sales × 365

Question 34

How is Receivables days calculated?

Answer 34

Receivables / Revenue × 365

Question 35

What is Inventory turnover?

Answer 35

Cost of sales / Average inventories held

Question 36

How do you calculate Average rate of return (%)?

Answer 36

Average annual return (£) / Initial cost of project (£) × 100