7. Formulas and ratios
- Syllabus
- 0264–2027–2028
- Section
- 7
- Level
- —
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In this section
Topic 7.1
7.1. Marketing
Objectives in this topic
7.1.1—Market share
- Market share = Sales revenue of a business / Total sales revenue for the whole market × 100 = %.
Topic 7.2
7.2. Production
Objectives in this topic
7.2.1—Labour productivity
- Labour productivity = Output per period (units) / Number of employees = units per employee.
7.2.2—Total variable cost
- Total variable cost = Variable cost per unit × number of units.
7.2.3—Variable cost per unit
- Variable cost per unit = Total variable cost / Number of units.
7.2.4—Total cost
- Total cost = Total fixed costs + total variable costs.
7.2.5—Average cost
- Average cost = Total cost / Number of units.
7.2.6—Break-even output
- Break-even output = Fixed costs / Contribution per unit.
7.2.7—Contribution per unit
- Contribution per unit = Selling price per unit - variable cost per unit.
7.2.8—Margin of safety
- Margin of safety = Actual number of sales - break-even number of sales.
Topic 7.3
7.3. Business finance
Objectives in this topic
7.3.1—Revenue
- Revenue = Selling price per unit × number of units sold.
7.3.2—Gross profit
- Gross profit = Revenue - cost of sales.
7.3.3—Profit
- Profit = Total revenue - total costs, or gross profit - expenses.
7.3.4—Working capital
- Working capital = Current assets - current liabilities.
7.3.5—Profit margin
- Profit margin = Profit / Revenue × 100 = %.
7.3.6—Gross profit margin
- Gross profit margin = Gross profit / Revenue × 100 = %.
7.3.7—Return on capital employed (ROCE)
- ROCE = Profit / Capital employed × 100 = %.
Topic 7.4
7.4. Liquidity ratios
Objectives in this topic
7.4.1—Current ratio
- Current ratio = Current assets : current liabilities, or current assets / current liabilities. Answer can be presented as a ratio : 1 or as a number.
7.4.2—Acid test ratio
- Acid test ratio = Current assets - inventory : current liabilities, or (current assets - inventory) / current liabilities. Answer can be presented as a ratio : 1 or as a number.