Formulas Flashcards
(59 cards)
What is the formula for Total Revenue?
Total Revenue = Sales Price x Quantity
Total Revenue represents the total income generated from sales before any costs are deducted.
How is Total Variable Costs calculated?
Total Variable Costs = Variable Costs per unit x Quantity
Total Variable Costs represent costs that vary directly with the level of production.
What is the formula for Total Costs?
Total Costs = Total Variable Costs + Fixed Costs
Total Costs include both variable and fixed costs incurred in production.
What does Net Cash Flow represent?
Net Cash Flow = Inflows - Outflows
Net Cash Flow indicates the net amount of cash being transferred in and out of a business.
What is an Opening Balance?
Opening Balance is the amount of cash available at the beginning of a period.
It serves as the starting point for cash flow calculations.
How is Closing Balance calculated?
Closing Balance = Opening Balance + Net Cash Flow
Closing Balance reflects the total cash available at the end of a period.
What is Contribution per unit?
Contribution per unit = Sales Price - Variable Cost per unit
Contribution per unit indicates how much each unit sold contributes to covering fixed costs and generating profit.
What is the formula for Break Even?
Fixed Costs / Contribution per Unit
This formula calculates the number of units that must be sold to cover fixed costs.
How do you calculate Total Contribution?
Contribution per unit x quantity
Total Contribution shows the total amount contributed to fixed costs and profit.
What does Margin of Safety represent?
Actual Output - Break Even output
This indicates how much sales can drop before the business reaches its break-even point.
What is the formula for Profit?
Total Revenue - Total costs
Profit is the remaining income after all expenses have been deducted from total revenue.
What is Profit Variance?
Actual figures - Budgeted figures
This measures the difference between what was actually earned and what was budgeted.
What is the formula for Gross Profit?
Revenue - Cost of Sales
Gross Profit is a measure of a company’s profitability, indicating how much money is left over after deducting the cost of goods sold from revenue.
How do you calculate Gross Profit Margin?
Type of Profit/Revenue x 100
Gross Profit Margin shows the percentage of revenue that exceeds the cost of goods sold.
What is Operating Profit?
Gross Profit - Fixed Costs
Operating Profit reflects the earnings from core business operations, excluding expenses like taxes and interest.
What is the formula for Net Profit?
Operating Profit -/+ tax and interest
Net Profit is the final profit after all expenses, including taxes and interest, have been deducted from revenue.
What does the Current Ratio measure?
Current Assets / Current Liabilities
The Current Ratio indicates a company’s ability to pay short-term obligations with its short-term assets.
What are the three types of profit margins mentioned?
- Gross Profit Margin
- Operating Profit Margin
- Net Profit Margin
Each type of profit margin provides insight into different aspects of a company’s profitability.
What is the Acid Test ratio formula?
Current Assets - Inventory / Current Liabilities
The Acid Test ratio measures a company’s ability to pay off short-term liabilities without relying on the sale of inventory.
Define Productivity in a business context.
Total output in time period / number of inputs
Productivity measures how efficiently inputs are converted into outputs, often reflecting the effectiveness of labor and capital.
What does Capacity refer to in a production environment?
The maximum output that can be produced in a given time period
Capacity is a critical factor in determining the production capabilities of a business.
What is Utilisation in terms of production?
Actual Output / Maximum output x 100
Utilisation indicates the percentage of potential output that is actually being achieved, highlighting the efficiency of resource use.
What does ROCE stand for?
Return on Capital Employed
What is the formula for calculating Gearing?
Non-current liabilities / Capital employed x 100
