BUSINESS SL FORMULAE
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27 Terms
Acid Test Ratio
(Current assets − Stock) / Current liabilities
Annual Forecasted Net Cash Flow
Forecasted cash inflow − Forecasted cash outflows
Average Annual Profit
(Total returns − Capital cost) / Number of years
Break-even Level of Output
Fixed costs / Contribution per unit
Break-even Target Price
(Fixed costs / Production level) + Direct cost
Capacity Utilisation Rate
(Actual output / Productive capacity) × 100
Capital Employed
Non-current liabilities + Equity
Contribution per Unit
Selling price of a product − Direct costs per unit
Creditor Days
(Creditors / Cost of sales) × 365
Current Ratio
Current assets / Current liabilities
Debtor Days
(Debtors / Total revenue) × 365
Defect Rate (%)
(Number of defective products / Total output in time period) × 100
Degree of Operating Leverage
(Revenue − Total variable costs) / Operating profit
Gross Profit
Sales revenue − Cost of sales
Gross Profit Margin (%)
(Gross profit / Sales revenue) × 100
Market Share (%)
(Sales of business in time period / Total market sales in time period) × 100
Net Cash Flow
Total cash payments to a business (inflows) − Sum of cash payments made by it (outflows)
Price Elasticity of Demand (PED)
Percentage change in quantity demanded / Percentage change in price
Profit After Tax
Operating profit − Interest costs − Corporation tax
Profit Before Interest and Tax
Gross profit − Overhead expenses
Profit Margin (%)
(Profit before interest and tax / Sales revenue) × 100
Return on Capital Employed (%)
(Profit before interest and tax / Capital employed) × 100
Revenue (or Sales Turnover)
Selling price × Quantity sold
Revenue to Achieve Target Profit
(Fixed costs + Target profit) / (1 − Direct cost / Price)
Target Profit Level of Output
(Fixed costs + Target profit) / Contribution per unit
Total Contribution
Unit contribution × Output
Units of Production Method
Depreciation per unit = (Cost of asset − Residual value) / Total units produced; Annual depreciation = Depreciation per unit × Annual units produced