Business Formulas

• what are "cost of sales"

  how much it is to produce goods, not inlcuding other costs like fixed costs etc
• 2 important financial objectives

  lowering costs & selling more products
• gross profit

  revenue-COGS
• gross profit margin

  gross profit/revenue X 100
• operating profit

  gross profit- operating expenses
• operating profit margin

  operating profit/revenue X 100
• net profit

  operating profit-other expenses
• net profit margin

  net profit/revenue X 100
• contribution

  revenue-variable costs
• break even


  fixed costs/(sales revenue per unit-variable costs per unit)
• margin of safety

  current sales-breakeven/current sales X 100
• list three types of budget

  income budget

  expenditure budget

  profit budget
• three typical financial objectives

  profitability

  growth

  survival
• total costs

  fixed+variable costs
• profit formula

  revenue-fixed costs
• total variable costs

  variable cost per unit x no. of units sold
• market capitalisation of a business

  no. of shares issued x current share price
• net gain (decision trees)

  expected value - initial cost of decision
• market growth % in year

  (change in size of market between years/size of market between year 1) X 100
• sales growth % in year

  (change in sales of product between years/sales of product in year 1) X 100
• market share

  sales of one product/total market sales X 100
• price elasticity of demand

  % change in quantity demand/% change price
• added value

  sales revenue-cost of materials
• labour productivity

  output per time period/number of employees
• unit costs (average costs)

  total costs of production/no. of units produced
• capacity utilisation %

  actual output in time period/maxium possible output in time period X 100
• ROI

  return on investment/cost of investment X 100
• total contribution

  contribution per unit X units produced
• labour cost per unit

  labour costs/units of output
• payables days

  payables/cost of sales X 365
• recievables days

  recievables/sales revenue X 365
• inventory turnover

  COGS/average inventories held
• Average rate of return %

  (return from project/no. of years)/initial cost of investment X 100
• market growth (%)

  (size of market yr1-size of market yr2) / size of market yr2 X 100