business formulas
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36 Terms
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revenue
Selling price per unit × Number of units sold
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total variable costs
Variable cost per unit × Number of units sold
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total costs
Fixed costs + Variable costs
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profit (2)
Total revenue − Total costs
OR
total contribution - fixed costs
OR
total contribution - fixed costs
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market capitalisation
Number of issued shares × Current share price
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EV of 2
(Pay-off of A × probability of A) + (Pay-off of B × probability of B)
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net gain
Expected value − Initial cost of decision
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market growth
Change in the size of the market over a period /Original size of the market × 100 (%)
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market share
Sales of one product OR brand OR business /Total sales in the market × 100 (%)
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added value
Sales revenue − costs of bought-in goods and services
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labour productivity
Output over a time period / Number of employees
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unit/average costs
Total costs / Number of units of output
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capacity utilisation
Actual output / Maximum possible output × 100 (%)
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return on investment
Profit from the investment (£) / Cost of the investment (£) × 100 (%
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gross profit
Revenue − Cost of Sales
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operating profit
Gross profit − Operating Expenses
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profit for year
Operating profit + Profit from other activities − Net finance costs − Tax
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gross profit margin
Gross profit / Revenue × 100 (%)
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operating profit margin
Operating profit / Revenue × 100 (%)
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profit for year margin
Profit for year / Revenue × 100 (%)
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variance
Budgeted figure - actual figure
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contribution per unit
Selling price − Variable costs per unit
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total contribution (2)
Contribution per unit × Units sold
OR
total revenue - total variable costs
OR
total revenue - total variable costs
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Break even output
Fixed costs / Contribution per unit
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margin of safety
Actual level of output − Break-even level of output
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labour turnover
Number of staff leaving / Number of staff employed by the business × 100 (%)
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employee retention
Number of employees who remained with the business for the whole period of time / of employees at start of the time period ×100 (%)
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employee costs as % of turnover
Employee costs / Turnover × 100
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labour cost per unit
Labour costs / Units of output
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return on capital employed ROCE
Operating profit / Total equity + non-current liabilities × 100
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current ratio
Current assets / Current liabilities
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gearing
Non-current liabilities / Total equity + non-current liabilities ×100 (%)
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payables days
Payables / Cost of sales × 365
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receivables days
Receivables / Revenue × 365
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inventory turnover
Cost of sales / Average inventories held
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average rate of return
Average annual return (£) / Initial cost of project (£) × 100
Note 
Flashcards (242)