Formulae

Question 1

Gross Profit

Answer 1

Sales Revenue - Cost of Sales

Question 2

Operating Profit

Answer 2

Gross Profit - Operating Expenses

Question 3

Net Profit

Answer 3

Operating Profit - Interest and Tax

Question 4

Gross Profit Margin

Answer 4

(Gross Profit / Sales Revenue) x 100

Question 5

Operating Profit Margin

Answer 5

(Operating Profit / Sales Revenue) x 100

Question 6

Net Profit Margin

Answer 6

(Net Profit / Sales Revenue) x 100

Question 7

Return on Capital Employed (ROCE)

Answer 7

(Operating Profit / Capital Employed) x 100

Question 8

Capital Employed (ROCE)

Answer 8

Non-current liabilities + Total Equity

Question 9

Current Ratio

Answer 9

Current Assets / Current Liabilities

Question 10

Acid Test Ration

Answer 10

(Current Assets - Inventories) / Current Liabilities

Question 11

Payables Days or Creditor Days

Answer 11

(Payables / Cost of Sales) x 365

Question 12

Receivable days or Debtor Days

Answer 12

(Receivable / Sales Revenue) x 365

Question 13

Inventory Turnover (Times)

Answer 13

Cost of Sales / Inventory

Question 14

Inventory Turnover (Days)

Answer 14

(Inventory / Cost of Sales) x 365

Question 15

Break-Even Point

Answer 15

Fixed Costs / Contribution per Unit

Question 16

Contribution per Unit

Answer 16

Selling Price per Unit - Variable Cost per Unit

Question 17

Total Contribution

Answer 17

Total Sales Revenue - Total Variable Costs

Question 18

Margin of Safety

Answer 18

Actual Output - Break Even Output

Question 19

Payback period for a project with constant annual net cash flow

Answer 19

Initial Costs / Annual Net Cash Flow

Question 20

Payback period for a project with varying cash flows

Answer 20

Year before payback + (Initial investment remaining at the start of the year / Cash flow during the year) x 12 (months)

Question 21

Average Rate of Return (ARR)

Answer 21

((Total Net Return / life of Project in Years) / Initial Investment) x 100

Question 22

Net Present Value (NPV)

Answer 22

The same of all Present Values (PV) of net cash flows - Initial Investment

Question 23

Present Value (PV)

Answer 23

Net Cash Flow x Discount Factor

Question 24

Sales Volume

Answer 24

Total Sales Revenue / Selling Price per Unit

Question 25

Market Growth

Answer 25

((New Market Size - Old Market Size) / Old Market Size) x 100

Question 26

Market Share

Answer 26

(Sales of a Business / Total Market Sales) x 100

Question 27

Market Size

Answer 27

Total Sales of all businesses in a market (volume or value)

Question 28

Price Elasticity of Demand (PED)

Answer 28

Change in Quantity Demanded / % Change in Price

Question 29

Income Elasticity of Demand (YED)

Answer 29

Change in Quantity Demanded / % Change in Income

Question 30

Sales Forecasting

Answer 30

Sales data previous periods + adjustments for future factors

Question 31

Labour Turnover

Answer 31

(Number of Staff Leaving / average number of staff employed) x 100

Question 32

Labour Productivity

Answer 32

Output per period / Number of employees

Question 33

Labour cost per unit

Answer 33

Total labour costs / total units of output

Question 34

Capacity Utilisation

Answer 34

(Current output / maximum possible output) x 100

Question 35

Unit Cost

Answer 35

Total costs / number of units produced

Question 36

Productivity

Answer 36

Total output / total input

Question 37

Labour Productivity

Answer 37

Output per worker over a period of time

Question 38

Efficiency

Answer 38

Measured by the ration of useful out to total output