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Business Formula Sheet

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Dr. A.H.Butt
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434 views4 pages

Business Formula Sheet

Uploaded by

Dr. A.H.Butt
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Formula Sheet: Lists essential accounting and economic formulas used for business calculations, including added value and productivity measurements.
  • Income Statement: Details the structure of an income statement including sales revenue, cost of sales, and profit calculations.
  • Cash Flow: Describes cash flow concepts including opening and closing balances, net cash flow, and working capital.
  • Break-Even Analysis: Explains break-even calculations and formulas for determining profitability and contribution per unit.
  • Statement of Financial Position: Covers the components of a balance sheet including total assets, liabilities, and equity.
  • Profitability and Liquidity Ratios: Describes how financial ratios are computed to evaluate profitability and liquidity of a business.

______FORMULA SHEET______

Added value = selling price of a product – cost of raw materials


Piece of rate wage = no. of units x piece rate ($)
Time rate wage = no. of hours x hourly rate ($)
𝑠𝑎𝑙𝑒𝑠 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑏𝑢𝑠𝑖𝑛𝑒𝑠𝑠 ($)
Market share (%) = x 100
𝑡𝑜𝑡𝑎𝑙 𝑚𝑎𝑟𝑘𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 ($)

Selling price per unit = cost per unit + (cost per unit x profit %)
𝑜𝑢𝑡𝑝𝑢𝑡
Productivity or efficiency =
𝑖𝑛𝑝𝑢𝑡

𝑜𝑢𝑡𝑝𝑢𝑡 𝑜𝑣𝑒𝑟 𝑐𝑒𝑟𝑡𝑎𝑖𝑛 𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑


Labour productivity (output per worker) =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑘𝑒𝑟𝑠

Total Cost = fixed cost + variable cost


Variable cost = variable cost per unit x units produced
Or
Variable cost = raw material cost + labour wages
𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡
Average cost or Cost per unit =
𝑢𝑛𝑖𝑡𝑠

Total revenue or sales revenue = price per unit x units sold


𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒
Average total revenue =
𝑢𝑛𝑖𝑡𝑠 𝑠𝑜𝑙𝑑
BREAK-EVEN:
𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
Break-even point=
𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡−𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

Or
𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
Break-even output =
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

Contribution per unit = selling price – variable cost per unit


Profit = total revenue – total cost
Safety margin = total output – break-even output

CASH FLOW:
Closing bank/cash bal of 1 month = opening bank/cash bal of next month

Net cash flow = cash inflow – cash outflow


Closing balance = +opening balance + cash inflow – cash outflow
Or
Closing balance = +opening balance + net cash flow
Working capital = current assets – current liabilities

INCOME STATEMENT:

Cost of sales = opening inventories + purchases – closing inventory


Gross profit = sales revenue – cost of sales
Net profit = sakes revenue- cost of sales – expenses
Or
Net profit = gross profit – expenses
Retained profit = net profit after deducing all the expenses from gross
profit

STATEMNT OF FINANCIAL POSITION (BALANCE SHEET):


Total assets = current assets + non-current assets
Total liabilities = current liability + non-current liability
Capital or shareholders’ funds = total assets – total liabilities
Or
Capital or shareholders’ funds = share capital + retained profit

PROFITABILITY RATIOS:
𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
Return on capital employed (ROCE) % = x 100
𝑐𝑎𝑝𝑖𝑡𝑎𝑙

𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
Gross profit margin = x 100
𝑠𝑎𝑙𝑒𝑠

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
Net profit margin = x 100
𝑠𝑎𝑙𝑒𝑠

LIQUIDITY RATIOS:
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
Current ratio (working capital ratio) =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠−𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠
Acid test or quick ratio =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Net income or disposable income = income – Tax amount

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