GCSE Year 10 Business OCR - Formulas for Finance
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21 Terms
Revenue
Price x Quantity
Net profit
Gross Profit - Expenses
Gross Profit
Revenue - Cost of Sales
Profit
Revenue - Total costs
Net cash flow
All Inflows - All Outflows
Net profit margin
(Net profit/sales revenue) x 100
Gross Profit margin
(Gross profit/sales revenue) x 100
Variable costs meaning
The costs that change depending on the output of the business, for example: you would only spend money on packaging of the product if you have run out or need more.
Fixed costs meaning
The costs that stay the same regardless of input or output, for example: rent is a fixed cost because you will have to pay the same amount of rent even if you have sold 5 units of products or whether you have sold 1000 units of products. (rent prices may go up or down but it still counts as a fixed cost as it DOES NOT CHANGE DEPENDING ON INPUT OR OUTPUT.
Average rate of return/ Average rate of results (same thing)
(Average annual profit/Cost of investment) x 100
Average annual profit
There are 5 steps:
1 - Add up ALL income
2 - Take away ALL costs
3 - Divide by the number of year
4 - Divide by the costs
5 - Multiply by 100
Closing balance
Net cash flow + Opening balance
Profit or loss
They might ask you this in the exam, but it is the same thing as the formula of profit!
Formula: Revenue - total costs
Total costs
Fixed costs + Variable costs
Break even
When a business reaches a point where the business does not make a profit or a loss
P.S: Remember that it is variable costs PER UNIT, many students lose marks because of this, REMEMBER THIS
Formula: Fixed costs / (selling price - variable costs PER UNIT)
Opening balance
The amount of money in a business at the start of the month
Percentage change
[(new - old) / old] times by a 100
Market share
(total sales of business/total sales of market) times by a 100
Expenses/Total expenses (same formula)
Gross profit - net profit
Contribution
Selling Price − Variable Cost (per unit)
Adding value
Selling price − Cost of inputs