Business Calculations

Gross Profit

Sales Revenue - Cost of Sales

Operating Profit

Gross Profit - Operating Expenses

Profit for the Year

Operating Profit + Other Income - Interest and Tax

Gross Profit Margin (%)

(Gross Profit / Sales Revenue) x 100

Operating Profit Margin (%)

(Operating Profit / Sales Revenue) x 100

Profit for the Year Margin (%)

(Profit for the Year / Sales Revenue) x 100

Contribution per Unit

Selling Price - Variable Cost per Unit

Total Contribution

Contribution per Unit x Units Sold (or Total Revenue - Total Variable Costs)

Break-even Point (Units)

Fixed Costs / Contribution per Unit

Margin of Safety

Actual Level of Output - Break-even Level of Output

Return on Capital Employed / ROCE (%)

(Operating Profit / Capital Employed) x 100

Capital Employed

Total Equity + Non-current Liabilities

Current Ratio

Current Assets / Current Liabilities

Gearing (%)

(Non-current Liabilities / Capital Employed) x 100

Inventory Turnover

Cost of Sales / Average Inventory

Receivables Days

(Receivables / Revenue) x 365

Payables Days

(Payables / Cost of Sales) x 365

Payback Period

Year before full recovery + (Amount of investment outstanding / Cash flow in the year of recovery) x 12 months

Average Rate of Return / ARR (%)

(Average annual profit / Initial Outlay) x 100

Average Annual Profit (for ARR)

Total Profit over life of project / Number of years

Net Present Value (NPV)

Sum of (Cash Flow x Discount Factor) - Initial Outlay