Business Equations

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

Labour productivity

Output per period / no. employees in period

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