Formulas

• What is the formula for market capitalisation of a business?

  Number of issued shares × Current share price
• What does market growth percentage represent?

  Change in market size over a period
• What is the formula for market share?

  Sales of one product / Total sales in the market
• What does price elasticity of demand measure?

  % change in quantity demanded / % change in price
• How is income elasticity of demand calculated?

  % change in quantity demanded / % change in income
• What is the formula for revenue (sales or turnover)?

  Selling price per unit × Number of units sold
• How are total variable costs calculated?

  Variable cost per unit × Number of units sold
• What is the formula for total costs?

  Fixed costs + Variable costs
• How is contribution per unit calculated?

  Selling price - Variable costs per unit
• What does total contribution represent?

  Contribution per unit × Units sold
• What is the formula for break-even output?

  Fixed costs / Contribution per unit
• What does margin of safety indicate?

  Actual level of output - Break-even level of output
• How are payable days calculated?

  Payables / Cost of sales × 365
• What is the formula for receivable days?

  Receivables / Revenue × 365
• What does the current ratio measure?

  Current assets / Current liabilities
• What is the formula for profit?

  Total revenue - Total costs
• How is gross profit calculated?

  Revenue - Cost of sales
• What does operating profit represent?

  Gross profit - Operating expenses
• How is net profit calculated?

  Gross profit - Expenses
• What does profit for the year include?

  Operating profit + Profit from other activities - Net finance - Tax
• What is variance in business terms?

  Budgeted vs actual figures