Equations

• Revenue (Sales or Turnover)

  Selling price per unit × Number of units sold
• Variable costs (Total variable costs)

  Variable cost per unit × Number of units sold
• Total costs

  Fixed costs + Variable costs
• Profit

  Total revenue − (Total costs OR Total contribution − Fixed costs)
• Market capitalisation of a business

  Number of issued shares x Current share price
• Expected value of a decision with two possible outcomes


  (Pay-off of A × probability of A) + (Pay-off of B × probability of B)
• Net gain

  Expected value − Initial cost of decision
• Market growth (%)

  Change in the size of the market over a period / Original size of the market × 100
• Market share (%)

  Sales of one product OR brand OR business / Total sales in the market × 100
• Added value


  Sales revenue − costs of bought in goods and services
• Labour productivity


  Output over a time period / Number of employees
• Unit costs (average costs)

  Total costs / Number of units of output
• Capacity utilisation (%)


  Actual output / Maximum possible output × 100
• Return on investment (%)

  Profit from the investment (£) / Cost of the investment (£) × 100
• Gross Profit

  Revenue − Cost of Sales
• Operating profit

  Gross profit − Operating Expenses
• Profit for year


  Operating profit + (Profit from other activities − Net finance costs − Tax)
• Gross profit margin (%)

  Gross profit / Revenue × 100
• Profit from operations margin = Operating profit margin (%)


  Operating profit / Revenue × 100
• Profit for year margin (%)

  Profit for year / Revenue × 100
• Variance

  Budgeted figure – actual figure
• Contribution per unit

  Selling price − Variable costs per unit
• Total contribution

  Contribution per unit × (Units sold OR Total revenue − Total variable costs)
• Break-even output

  Fixed costs / Contribution per unit
• Margin of safety


  Actual level of output − Break-even level of output
• Labour turnover (%)

  Number of staff leaving / Number of staff employed by the business × 100
• Employee costs as percentage of turnover


  Employee costs / Turnover × 100
• Labour cost per unit

  Labour costs / Units of output
• Return on capital employed (ROCE) (%)

  Operating profit / Total equity + non-current liabilities × 100
• Current ratio

  Current assets / Current liabilities
• Gearing (%)

  Non-current liabilities / Total equity + non-current liabilities × 100
• Payables days

  Payables / Cost of sales × 365
• Receivables days

  Receivables / Revenue × 365
• Inventory turnover

  Cost of sales / Average inventories held
• Average rate of return (%)

  Average annual return (£) / Initial cost of project (£) × 100
• Payback = amount invested/ annual net return
• Present value = net cash flow x discount factor
• Net Present Value = total present value - investment
• Return (NPV) = (net present value/ investment) x 100