A LEVEL BUSINESS FORMULAS (EDUQAS)

Comprehensive vocabulary flashcards covering key business formulas and concepts from the EDUQAS A Level Business curriculum.

Break Even Formula

$$\frac{\text{Fixed costs}}{\text{contribution per unit}}$$

Market Share Formula

$$\frac{\text{Sales}}{\text{Total Market Sales}} \times 100$$

Market Size Formula

$$\frac{\text{Sales of main competitor}}{\text{share of the market}} \times 100$$

Contribution Per Unit

$$\text{Selling price} - \text{variable cost per unit}$$

Total Contribution

$$\text{Contribution per unit} \times \text{number of units sold}$$

Profit

$$\text{Total revenue} - \text{total cost}$$

Sales Revenue

$$\text{Price} \times \text{Quantity}$$

Margin of Safety Formula

$$\text{Actual sales} - \text{Break even sales}$$

Total Costs

$$\text{fixed costs} + \text{variable costs}$$

Gross Profit

$$\text{sales} - \text{cost of goods sold}$$

Net Profit

$$\text{Gross Profit} - \text{Expenses}$$

Gross Profit Margin

$$\frac{\text{Gross profit}}{\text{sales revenue}} \times 100$$

Net Profit Margin

$$\frac{\text{Net profit}}{\text{sales revenue}} \times 100$$

Labour Turnover Formula

$$\frac{\text{number of staff leaving}}{\text{number of staff}} \times 100$$

Labour Productivity Formula

$$\frac{\text{Output}}{\text{number of employees}}$

Absenteeism Formula

$$\frac{\text{number of employees absent}}{\text{total number of employees}} \times 100$$

Capacity Utilisation Formula

$$\frac{\text{Current output}}{\text{maximum possible output}} \times 100$$

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

$$\text{current assets} - \text{current liabilities}$$

Capital Employed

$$\text{Total equity} + \text{non current liabilities}$$

Price Elasticity of Demand

$$\frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}$$

Income Elasticity of Demand

$$\frac{\% \text{ change in quantity demanded}}{\% \text{ change in income}}$$

Owner's Equity

$$\text{total assets} - \text{total liabilities}$$

Acid Test Ratio

$$\frac{\text{Current Assets} - \text{Stock}}{\text{Current Liabilities}}$$

Current Ratio

$$\frac{\text{current assets}}{\text{current liabilities}}$$

Gearing Ratio

$$\frac{\text{non-current liabilities}}{\text{capital employed}} \times 100$$

Return on capital employed (ROCE)

$$\frac{\text{Net profit}}{\text{capital employed}} \times 100$$

Index Number Formula

$$\frac{\text{current price}}{\text{base year price}} \times 100$$

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

$$\text{Total inflows} - \text{total outflows}$$

Net Assets Employed

$$\text{Total assets} - \text{current liabilities}$$

Straight Line Depreciation

$$\frac{\text{cost} - \text{residual value}}{\text{useful life}}$$

Float Time

$$\text{Earliest Start Time of Next Activity} - \text{Earliest Finish Time of Current Activity}$$

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

$$\frac{\text{Investment required}}{\text{annual net cash inflow}}$$

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.