# Formulas

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- Created by: sophie98campbell
- Created on: 09-09-16 10:09

Total costs

Fixed costs + Variable costs

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Profit

Total revenue - Total costs OR Total contribution - Fixed costs

2 of 39

Variable costs (Total variable costs)

Variable cost per unit x Number of units sold

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Total revenue (Sales revenue or Turnover)

Selling price per unit x Number of units sold

4 of 39

Market capitalisation of a business

Number of issued shares x Current share price

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Expected value of a decision with two possible outcomes - A and B

(Pay off of A x Probability of A) + (Pay off of B x Probability of B) N.B. Probability of A + Probability of B = 1.0

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In a decision tree net gain

Expected value - Initial cost of decision

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Market growth % in year X

Change in the size of the market between year (X-1) and year X/Size of the market in year (X-1) x 100

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Sales growth % in year X

Change in sales of product or business between year (X-1) and year X/Sales of product or business in year (X-1) x 100

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Market share %

Sales of one product OR brand OR business/Total sales in the market x 100

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Price elasticity of demand

Percentage change in quantity demand/Percentage change price x 100

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Added value (value added)

Sales revenue - costs of bought in goods and services

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Labour productivity

Output per time period/Number of employees

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Unit costs (average costs)

Total costs of production/Number of units of output produced

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Capacity utilisation (%)

Actual output in a given time period/Maximum possible output in a given time period x 100

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Return on investment (%)

Return on investment (£)/Cost of the investment (£) x 100

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Gross profit

Sales revenue - Cost of sales

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Operating profit

Sales revenue - Cost of sales - Operating expenses

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Profit for year

Operating profit + Profit from other activities - Net finance costs - Tax

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Contribution per unit

Selling price - Variable costs per unit

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Total contribution (1)

Contribution per unit x Units produced or sold

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Total contribution (2)

Total revenue - Total variable costs

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Break even output

Fixed costs/Contribution per unit

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Margin of safety

Actual level of output - Break even level of output

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Gross profit margin (%)

Gross profit/Sales revenue x 100

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Profit from operations margin

Operating profit margin (%) =Operating profit/Sales revenue x 100

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Profit for year margin (%)

Profit for year/Sales revenue x 100

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Labour turnover (%)

Number of staff leaving during the year/Average number of staff employed by the business during the year x 100

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Employee retention rate (%) for a particular time period

Number of employees at end of period - number of leavers/Number of employees at end of period x 100

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Labour cost per unit

Labour costs/Units of output

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Return on capital employed (%)

Operating profit/Total equity plus non-current liabilities x 100

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Capital employed

Total equity + non-current liabilities

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Current ratio

Current assets/Current liabilities

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Gearing (%)

Non-current liabilities/Total equity + Non-current liabilities x 100

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Payables days

Payables/Cost of sales x 365

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Receivables days

Receivables/Sales revenue x 365

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Inventory turnover

Cost of goods sold/Average inventories held

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Average rate of return (%)

Net return from project (£)/Number of years/Initial cost of project (£) x 100

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Net from return from project

Total income from project over its lifetime - Total costs of project over its lifetime, including the initial cost of the project

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## Other cards in this set

### Card 2

#### Front

Profit

#### Back

Total revenue - Total costs OR Total contribution - Fixed costs

### Card 3

#### Front

Variable costs (Total variable costs)

#### Back

### Card 4

#### Front

Total revenue (Sales revenue or Turnover)

#### Back

### Card 5

#### Front

Market capitalisation of a business

#### Back

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