Business Unit 3 Revision - Formulas

• Net cash flow


  Total Cash Inflow - Total Cash Outflow
• Closing balance 


  Opening balance + Net Cash Flow
• Total revenue


  Selling Price x Quantity Sold
• Total costs


  Fixed costs + Total Variable costs
• Profit


  Total revenue – Total costs
• Total contribution 


  Sales Revenue - Total Variable Costs
• Contribution (per unit)


  Selling Price – Variable Cost (per unit)
• Profit (using contribution)


  Contribution per unit x margin of safety
• Break-even output


  Total Fixed Costs / Unit Contribution
• Margin of Safety


  Actual Sales – Break-even level of output
• Revenue 


  Unit price x Quantity sold
• Gross profit


  Sales Revenue – Cost of Goods Sold
• Cost of goods sold

  Opening Inventory + Purchases – Closing Inventory
• Profit/loss for the year


  Gross Profit – expenses + other income
• Net book value


  Cost - Depreciation
• Net current assets


  Current Assets - Current Liabilities
• Net assets


  Non-current assets + Net current assets - Long term liabilities
• Capital employed


  Opening Capital + Profit for the Year less drawings
• Balance sheet (what needs to balance?)

  Net Assets = Capital Employed
• Gross profit margin


  Gross Profit/Revenue x 100
• Mark-up


  Gross Profit/Cost of Sales x 100
• Profit margin


  Profit/Revenue x 100
• Return on capital employed

  Profit/Capital Employed x 100
• Current ratio


  Current Assets/Current Liabilities
• Liquid capital ratio


  Current Assets - Inventory/Current Liabilities
• Trade receivable days


  Trade Receivables/Credit Sales x365
• Trade payable days


  Trade Payables/Credit Purchases x 365
• Inventory turnover


  Average Inventory/Cost of Sales x 365
• Average Inventory


  (Opening inventory + Ending inventory) / 2