business formulas

revenue

Selling price per unit × Number of units sold

total variable costs

Variable cost per unit × Number of units sold

total costs

Fixed costs + Variable costs

profit (2)

Total revenue − Total costs

OR

total contribution - fixed costs

market capitalisation

Number of issued shares × Current share price

EV of 2

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

net gain

Expected value − Initial cost of decision

market growth

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

market share

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

added value

Sales revenue − costs of bought-in goods and services

labour productivity

Output over a time period / Number of employees

unit/average costs

Total costs / Number of units of output

capacity utilisation

Actual output / Maximum possible output × 100 (%)

return on investment

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

gross profit

Revenue − Cost of Sales

operating profit

Gross profit − Operating Expenses

profit for year

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

gross profit margin

Gross profit / Revenue × 100 (%)

operating profit margin

Operating profit / Revenue × 100 (%)

profit for year margin

Profit for year / Revenue × 100 (%)

variance

Budgeted figure - actual figure

contribution per unit

Selling price − Variable costs per unit

total contribution (2)

Contribution per unit × Units sold

OR

total revenue - total variable costs

Break even output

Fixed costs / Contribution per unit

margin of safety

Actual level of output − Break-even level of output

labour turnover

Number of staff leaving / Number of staff employed by the business × 100 (%)

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 (%)

employee costs as % of turnover

Employee costs / Turnover × 100

labour cost per unit

Labour costs / Units of output

return on capital employed ROCE

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

current ratio

Current assets / Current liabilities

gearing

Non-current liabilities / Total equity + non-current liabilities ×100 (%)

payables days

Payables / Cost of sales × 365

receivables days

Receivables / Revenue × 365

inventory turnover

Cost of sales / Average inventories held

average rate of return

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