business formulas

• sales revenue

  selling price x sales volume
• market share

  business sales/total market sales

  x100
• added value

  selling price-cost of making product
• PED

  % change in quantity demanded/%change in price
• YED

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

  inflows-outflows
• closing balance (in cash flow forecast)

  opening balance-net cash flow
• sales revenue

  selling price x sales volume
• sales volume

  sales revenue/selling price
• TOTAL variable costs

  average variable costs x quantity produced
• contribution

  selling price - variable costs
• break even

  fixed costs / contribution per unit
• gross profit

  revenue-cost of sales
• operating profit

  gross profit - expenses
• profit for the year

  operating profit-interest (or tax)
• GPM/OPM/PFYM

  GP or OP or PFY / revenue

  x 100
• net assets

  assets-liabilities
• current ratio

  current assets / current liabilities
• how are current and acid test ratios expressed?

  answer : 1
• acid test ratio

  current assets-inventory / current liabilities
• working capital

  current assets-current liabilities
• capacity utilisation (%)

  current output/maximum output

  x 100
• capital employed

  NCL - equity
• gearing (%)

  NCL/ capital employed

  x 100
• Return on capital employed (%)

  operating profit/capital employed

  x100
• labour productivity

  output/number of employees
• labour turnover

  number of staff leaving / average number of staff employed

  x 100
• labour retention

  number employed - number of leavers /number employed at start

  x 100
• absenteeism

  number of absences/number employed x time period

  x 100
• payback

  cost of project/net cash flow

  x 100
• ARR

  average net return/investment x100
• NPV

  1. cash flow x discount factor
  2. add present values together
  3. subtract initial investment
• return on an investment

  NPV/investment x100
• Expected monetary value

  probability of outcome x payoff
• net gain

  EMV-initial cost
• total float

  LFT-duration-EST
• how to interpret PED values

  always negative so ignore - sign

  greater than 1:elastic

  smaller than 1:inelastic
• how to interpret YED values:

  positive: normal

  negative: inferior