A LEVEL BUSINESS COMP 2 FORMULAS

Price Elasticity of Demand (PED)

% change in QD / % change in price

Income Elasticity of Demand (YED)

% change in QD / % change in income

Working capital

Current assets – Current liabilities

Net assets

(current assets + non current assets) –(current liabilities + long term liabilities)

Shareholder funds

Share capital + reserves

Capital employed

Shareholder funds + long term liabilities

ROCE

Net profit/ Capital employed x100

Current ratio

Current assets / Current liabilities

Acid test ratio

Current assets - stock / Current liabilities

Gearing

Long term liabilities / Capital employed x100

Cost benefit analysis

(public benefit + private benefits) – (public costs + private costs)

Critical Path Analysis Earliest start time

EST of previous node at start + activity duration.

Critical Path Analysis Latest finish time

LFT of node at end – activity duration

Critical Path Analysis Float time

LFT of the node at the end of activity – duration – LFT of the node at the start of the activity

Decision Trees Total expected value

Outcome x probability

Decision Trees Net gain

Success TEV + Failure TEV – initial cost

Payback Period

Cumulative cash flow figure/ Net cash flow for next year x100

Average Rate of Return (ARR)

Average annual profit/ Cost of investment x100

Average annual profit (for ARR)

Final cumulative CF/number of years

Discounted Cashflow (Net Present Value)

Sum of (Net cash flow x Discount Factor of each year) – cost of investment