AQA A Level Business Equations

• Revenue (sales or Turnover)=

  Selling price per unit X number of units sold
• Variable costs (Total Variable costs)=

  Variable cost per unit X number of Units sold
• Total cost=


  Fixed costs + Variable costs
• Profit=

  Total revenue - Total costs
• Profit=


  Total contribution - Fixed costs
• Market capitalisation of a business =


  Number of issued shares X Current share price
• Expected value of a decision with 2 possible outcomes eg. A&B= 


  [Pay-off of A X Probability of A] + [Pay-off of B X Probability of B]
• Net Gain = 


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


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


  Sales revenue - costs of brought-in goods and services
• Labour productivity = 


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

  Total costs/ number of units of outputs
• capacity utilisation (%) = 


  Actual output / Maximum possible output X 100
• Gross profit = 


  Revenue - cost of sales
• Return on investment (%) =

  profit from the investment (£) / cost of the investment (£) x 100
• 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 X 100
• operating profit margin (%) =

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


  Profit for year / revenue X 100
• Variance =


  Budgeted figure - actual figure
• Contribution per unit =

  Selling price - Variable costs per unit
• Total contribution =


  Contribution per unit X Units sold
• Total contribution = 


  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 X 100
• Employee retention rate (%) for a particular time period = 


  Number of employees who remained with the business for the whole period of time / Number of employees at start of the time period X 100
• Employee costs as a percentage of turnover =


  Employee costs / Turnover X 100
• Labour costs per unit =

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


  Operating profit / Total equity + non-current liabilities X 100 (where total equity + non- current liabilities = capital employed)
• Current Ratio =


  Current assets / current liabilities
• Gearing (%) = 


  Non-current liabilities / Total equity + non-current liabilities X 100 (where total equity + non-current liabilities = capital employed)
• Payables days =


  Payables / Cost of sales X 365
• Receivable days = 


  Receivables / Revenue X 365
• Inventory turnover = 


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


  Average annual return (£) / Initial cost of project (£) X 100