BUSINESS EDUQAS FORMULAS

Break Even Formula

Fixed costs / contribution per unit

Market Share Formula

Sales/Total Market Sales X 100

Market Size Formula

Sales of main competitor / share of the market x 100

Contribution Per Unit

Selling price - variable cost per unit

Total Contribution

Contribution per unit x number of units sold

Profit

Total revenue - total cost

Sales Revenue

Price x Quantity

Margin of Safety Formula

Actual sales - Break even sales

Total Costs

fixed costs + variable costs

Gross Profit

sales - cost of goods sold

Net Profit

Gross Profit - Expenses

Gross Profit Margin

Gross profit/sales revenue x 100

Net Profit Margin

Net profit / sales revenue x 100

Labour Turnover Formula

number of staff leaving / number of staff x 100

Labour Productivity Formula

Output / number of employees

Absenteeism Formula

number of employees absent/total number of employees x 100

Capacity Utilisation Formula

Current output/maximum possible output x 100

Added Value

the difference between the cost of purchasing raw materials and the price the finished goods are sold for

Lead Time

Time interval between ordering and receiving the order

Economies of Scale

Factors that cause a producer's average cost per unit to fall as output rises

Price Elastic

A product with demand that is highly price sensitive, so price elasticity is above -1

Price Inelastic

A product with demand that is not very sensitive to a change in its price, so price elasticity is less than -1

Inferior Good

These are goods with a negative income elasticity value, meaning as incomes rise, demand for a good fall and vice versa.

Normal Good

A good that consumers demand more of when their incomes increase

Luxury Good

A good with an income elasticity greater than +1 meaning that a rise in income causes a larger rise in demand for this type of good e.g. foreign holidays.

Working Capital

current assets - current liabilities

Capital Employed

Total equity + non current liabilities

Price Elasticity of Demand

% change in quantity demanded / % change in price

Income Elasticity of Demand

% change in quantity demanded / % change in income

Owner's Equity

total assets - total liabilities

Acid Test Ratio

Current Assets - Stock / Current Liabilities

Current Ratio

current assets/current liabilities (liquidity)

Gearing Ratio

non-current liabilities/capital employed x 100

Return on capital employed (ROCE)

Net profit / capital employed x 100

Index Number Formula

(current price/base year price) x 100

3 Point Moving Average

3 period found by-

Adding up every 3 pieces of Data, and dividing it by 3 to find the moving average

Line of Best Fit

A line drawn in a scatter plot to fit most of the dots and shows the relationship between the two sets of data

Variance Analysis

The difference between the expected values and the actual ones.

Adverse Variance

When costs are higher than expected or revenue is lower than expected

Favourable Variance

When costs are lower than expected or revenue is higher than expected

Net cash flow formula

Total inflows - total outflows

Net Assets Employed

Total assets - current liabilities

Straight Line Depreciation

(cost-residual value)/useful life

Float Time

Earliest Start Time of Next Activity - Earliest Finish Time of Current Activity

Average rate of return (ARR)

calculates the average annual profit of an investment project, expressed as a percentage of the initial sum of money invested

Payback Period Formula

Investment required/annual net cash inflow

NPV method

The NPV of a project is the PV (Present Value) of all the future inflows of the project minus the cost of implementing the project