business formulas

• % mark up


  (Difference in price/original cost) X 100
• % change


  ((New value - old value)/old value) X 100
• Price elasticity of demand (PED)


  % change in quantity demanded/% change in price
• Income elasticity of demand (YED)


  % change in quantity demanded/% change in income
• net cash flow


  cash inflows - cash outflows
• opening balance


  cash balance at the start of the month
• closing balance


  opening balance + net cash flow
• cumulative flow


  sum of all closing balances
• sales revenue


  selling price X quantity sold
• total variable costs


  variable cost per unit X quantity sold
• total costs


  fixed costs + variable costs
• profit


  total revenue - total costs
• break even output


  fixed costs/contribution per unit
• contribution per unit


  selling price per item - variable cost per item
• total contribution


  contribution per unit X quantity sold
• margin of safety


  actual output - break even ouput
• profit


  contribution - fixed costs
• budget variance


  budget amount - actual amount
• gross profit


  sales revenue - cost of sales
• gross profit margin


  (gross profit/revenue) X 100
• operating (net) profit


  gross profit - (fixed costs+variable costs)
• operating profit margin


  (operating profit/revenue) X 100
• net capital employed


  non-current liabilities + equity
• current ratio


  current assets/current liabilities
• acid test (quick ratio)


  (current assets - stock)/current liabilities
• capital intensity


  capital goods/fixed costs X 100
• labour productivity


  output/number of employees
• labour turnover


  number of employees leaving/total number of employees X 100
• average cost per unit


  total production costs/total output
• actual output/maximum possible output X 100

  capacity utilisation
• market share


  Sales/Total Market Sales X 100
• gearing ratio


  non-current liabilities/capital employed x 100
• net gain - (decision trees)

  Expected value - initial cost of decision
• average rate of return

  Average annual profit / Cost of investment x 100