Business Equations
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40 Terms
Market capitalisation
No. ordinary shares issued x price of 1 share at current market price
Ordinary share capital
No. ordinary shares issued x price of 1 share at first issue
Market size
No. units sold x price
Market growth
(Change in size / original market size) x 100
Market share
(Companies sales / total market sales) x 100
Price elasticity of demand
% change in quantity demanded / % change in price
Income elasticity of demand
% change in quantity demanded / % change in income
Unit cost
Total costs / units produced
Capacity
(Total output / total capacity) x 100
Revenue
Goods sold x selling price
Total costs
Fixed costs + variable costs
Return on investment
(Profit from investment / investment costs) x 100
Contribution per unit
Selling price per unit - variable costs per unit
Total contribution
Total revenue - total variable costs
Break even output
Fixed costs / contribution per unit
Margin of safety
Actual output - break even output
Gross profit
Revenue - cost of sales
Gross profit margin
(Gross profit / revenue) x 100
Operating profit
Gross profit - expenses
Operating profit margin
(Operating profit / revenue) x 100
Profit for the year / net profit
Operating profit - any other costs or fees
Net profit margin
(Net profit / revenue) x 100
Retention rate
(Total no. staff working for whole period / total no. staff at beginning of period) x 100
Labour turnover rate
(Total no. staff leaving / average total no. staff) x 100
Average total number of staff
No. staff at start of year + at end of year / 2
Employee costs as % of turnover
(Total employee costs / total revenue) x 100
Labour productivity
Total output / total no. employees
Labour cost per unit
Total labour costs / total units produced
ROCE
(Operating profit / capital employed) x100
Current ratio
Current assets / current liabilities
Gearing
(Non-current liabilities / capital employed) x100
Inventory turnover
Cost of sales / value of inventory
Receivables days
(Receivables value / annual revenue) x365
Payables days
(Trade payables / cost of sales) x365
Fixed costs
revenue - profit - variable costs
Expected value
Pay off of a x probability + pay off of b x probability
Net gain
Expected value - initial decision cost
Sales growth
Change in sales / original sales
Added value
Revenue - costs of bought in goods and services
Variance
Actual - budgeted