Business formulae

Formulae needed for AQA A-Level Business studies

Total Costs

Fixed costs + Variable costs

Profit

Total revenue - Total costs OR Total contribution - Fixed costs

Total variable costs

Variable cost per unit × Number of units sold

Sales Revenue / Turnover

Selling price per unit × Number of units sold

Market capitalisation of a business

Number of issued shares × Current share price

Market size volume

The quantity of goods and services produced in a particular market over a period of time usually one year

Market size (value)

The total sales revenue generated from selling all of the goods and services produced in a particular market over a period of time (usually one year)

Sales volume

The quantity of goods and services produced by a particular business over a period of time (usually one year).

Sales value

The total sales revenue of a particular business over a period of time usually (one year).

Market growth (%) in year X

Change in the size of the market between year (X-1) and year X ÷ Size of the market in year (X-1)

Sales growth (%) in year X

Change in sales of product or business between year (X-1) and year X ÷ Sales of product or business in year (X-1)

Market share (%)

Sales of one product OR brand OR business ÷ Total sales in the market

Price elasticity of demand

Percentage change in quantity demanded ÷ Percentage change in price

Added Value

Sales revenue - costs of bought in goods and services

Labour productivity

Output per time period ÷ Number of employees

Unit cost

Total costs of production ÷ Number of units of output produced

Capacity utilization

Actual output in a given time period ÷ Maximum possible output in a given time period

Return on investment (%)

Return on investment (£) ÷ Cost of the investment (£)

Gross Profit

Sales Revenue - Cost of Sales

Profit from Operations, or Operating profit

Sales Revenue - Cost of Sales - Operating Expenses

Profit for the year

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

Variance

The difference between an actual and a budgeted figure.

Contribution per unit

Selling price - Variable costs per unit

Total contribution

Contribution per unit × Units produced or sold OR Total revenue - Total variable costs

Break even output

Fixed costs ÷ Contribution per unit

Margin of safety

Actual level of output - Breakeven level of output

Gross profit margin (%)

Gross profit ÷ Sales revenue

Operating profit margin (%)

Operating profit ÷ Sales revenue

Profit for the year margin (%)

Profit for year ÷ Sales revenue

Labour turnover (%)

Number of staff leaving during the year ÷ Average number of staff employed by the business during the year

Employee retention rate (%) for a particular time period

Number of staff leaving during the year ÷ Average number of staff employed by the business during the year

Labour cost per unit

Labour costs ÷ Units of output

Return on capital employed (ROCE) (%)

Operating profit Total equity + non-current liabilities

Capital employed

total equity + non-current liabilities

Current ratio

Current assets ÷ Current liabilities

Gearing (%)

Non-current liabilities ÷ (Total equity + non-current liabilities)

Payable days

(Payables ÷ Cost of sales) x 365

Receivable days

(Receivables ÷ Sales revenue) x 365

Inventory turnover

Cost of goods sold ÷ Average inventories held

Average rate of return %

Net return from project (£) or number of years ÷ Initial cost of project (£)

Payables

Creditors

Receivables

Debtors