Key Business Formulae for AS/A-level

These flashcards cover key business formulae essential for AS/A-level exams.

Revenue (Sales or Turnover)

Selling price per unit × Number of units sold

Market capitalisation of a business

Number of issued shares × Current share price

Expected value of a decision

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

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 costs (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

Gross profit margin (%)

Gross profit / Revenue × 100

Contribution per unit

Selling price − Variable costs per unit

Break-even output

Fixed costs / Contribution per unit

Labour turnover (%)

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

Employee retention rate (%)

Number of employees who remained with the business / Number of employees at start of the time period × 100

Employee costs as percentage of turnover

Employee costs / Turnover × 100

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