Formulas

Important Formulas to remember!

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  • Created by: Hannah
  • Created on: 30-04-11 23:16

TOTAL REVENUE:

 

Total Revenue* = Price x Quantity Sold

TR = P x QS 

 

*Total Revenue (aka. turnover) is the total amount of money earned by a firm from selling its goods/services.

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TOTAL COSTS:

Total Cost=Variable Costs* + Fixed Costs* TC = VC + FC

*Variable Costs are costs such as raw materials and labour, which change depending on the outflow.

*Fixed Costs are costs such as rent and insurance which will never change, regardless of the outflow.  

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BREAK-EVEN:

 Break-Even Point*

OCCURS WHEN

 Total Revenue = Total Costs

BE*occurs when TR = TC  

*The Break even point is where the firm has neither made a profit or a loss.

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MARGIN OF SAFETY:

Margin of Safety is the difference between  current output and break even output.

 

Margin of Safety = Current Output - Break Even Output

MoS = CO - BEO

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NET CASH FLOW:

Net Cash Flow=Total Inflow - Total Outflow

NCF = TI - TO

(Take the Total of what comes in and minus the Total of what goes out)

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CLOSING BALANCE:

 

 

Closing Balance=Net Cash Flow + Opening Balance

CB = NCF + OB

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