Business equations needed
5.0(1)
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Last updated 11:23 AM on 1/10/23
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37 Terms
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Revenue
Selling price per unit x number of units sold
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Variable costs
Variable cost per unit x number of units sold
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Total costs
Fixed costs + Variable costs
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Profit
Total revenue - Total costs
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Market capitalisation of a business
Number of shares issued x Current share price
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Expected value of a decision with 2 possible outcomes
(Pay-off of A x probability of A) + (Pay-off of B x 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 x 100
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Market Share
Sales of one product / Total sales in market x 100
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Added value
Sales revenue - costs of bought-in goods and services.
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Labour Productivity
Output over time / number of employees
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Unit costs (average costs)
Total costs / number of units of output
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Capacity utilisation
Actual output / maximum possible output x 100
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Return on investment
Profit from investment / Cost of investment x 100
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Gross profit
Revenue - Cost of sales
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Operating Profit
Gross profit - operating costs
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Profit for the year
Operating profit + profit from other activities - net finance costs - tax
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Gross Profit margin
Gross profit / revenue x 100
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Operating profit margin
Operating profit / revenue x 100
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Profit for the year margin
Profit for the year / revenue x 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
Contribution per unit x Units sold
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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 in the business x 100
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Employee retention rate for a particular time period
Number of employees who remain at business for whole time period / Number of employees at the start of the time period x 100
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Employee costs as percentage turnover
Employee costs / Turnover x 100
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Labour cost per unit
Labour costs / Units of output
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ROCE (Return On Capital Employed)
Operating profit / Total equity + Non-current liabilities x 100
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Capital employed
Total equity + Non-current liabilities
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Current ratio
Current assets / Current liabilities
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Gearing
Non-current liabilities / Total equity + Non-current liabilities x 100
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Payables days
Payables / Cost of sales x 365
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Receivables days
Receivables / Revenue x 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 x 100
Note 
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