Business Formulas

Market share

(Sales of a product or business/ Total market sales) x 100

Market growth

Market size (now) – Market size (old)/ market size (old) x100

Price elasticity of demand

% Change in quantity demanded/ % Change in price

Income elasticity of demand

% Change in quantity demanded/ % Change in income

Net cash flow

Total inflows – Total outflows

Sales volume

The total number of units sold over a specific period.

Sales revenue

total number of units sold over a period of time

Total variable costs

number of units sold x variable cost per unit

Total costs

The sum of fixed costs and variable costs.

Contribution per unit

Fixed costs + variable costs

Total contribution

Selling price per unit – Variable cost per unit

Break-even

Fixed costs/ Contribution per unit

Margin of safety

Actual Sales/Output – Break even output

Variance

Actual – Budget

Gross profit

Sales revenue minus cost of sales

Operating profit

Gross profit minus overheads

Net profit

Operating Profit +/- finance costs

Gross profit margin

(Gross profit / Sales revenue) x 100

Operating profit margin

(Operating profit/ Sales revenue) x 100

Profit for the year (net profit) margin

(Profit for the year / Sales revenue) x 100

Current ratio

Current assets/ current liabilities

Acid test ratio

(Current assets – stock) / current liabilities

Productivity (labour)

Output per period (units)/ Number of employees in that period

Average unit cost

Total costs / total output

Capacity utilisation

(Actual level of output/ Maximum possible output) x 100