# Business Studies formula cards (A2 & AS)

Business Studies formula cards (A2 & AS)

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## Ratio Analysis

• Profitability:
• G.P Margin = Gross Profit / sales x 100
• N.P Margin = Net Profit / sales x 100
• ROCE = Operating profit / capital employed x 100
• These ratios provide a picture of the profitability and effiency of the business.
• Activity:
• Stock Turnover= Stock / Sales x 365 days
• Debt Turnover= Debtors / Sales x 365 days
• Asset Turnover= Sales / Net Assets
• These ratios tell a business how well they are managing their resources.
• Liquidity:
• Current Ratio= Current Assets / Current liabilities
• Acid Test Ratio= Current Assets -Stock / Current liabilities
• These ratios focus on the short-term financial health of a business.
• Gearing:
• Gearing Ratio= long-term loans / Capital employed x 100%
• These ratios focus on the long-term finances of a business.
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## Cost and Revenue

• Total Cost= Fixed Cost  + Variable Cost
• Used by the business to see how much finance is required for each level of output.
• Average Cost= Total Cost / Total Output
• This can be used to establishe the basic price level by adding a suitable mark-up.
• Contribution= Price - Marginal Cost
• Marginal Cost:  It the extra cost incurred in producing one more unit of output.
• Total Revenue= Price x Quantity Sold
• Is the amount of money a business receives from selling its products.
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## Investment Appraisal

• ARR : Average annual profit/ Initial capital cost x 100
• Average annual Profit: Total profit / No. of Years
• Forecasted Net Cash Flow: Forecasted cash inflow (Annual Revenue) - Forcasted cash outflow (Annual operating costs)
• Payback Period: Additional Cash Inflow Needed / Annual cash flow x 12
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• Shareholder:
• Earnings per share (EPS)= N.P after tax / No. of ordinary shares
• Price/ Earning ratio (P/E)= Market Price / EPS
• Dividend yield ratio= Dividend per share / Market Share Price x 100
• ﻿﻿Return on Equity %= Profit after tax, interest and preference dividends x100/ Share Holders funds
• Efficiency:
• Stock Turnover Ratio= Costs of goods sold / Average stock Holding
• Debtor Day Ratio= Debtors/ Sale Turnover x 3
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