IGCSE Business
Formulas
Unit 1/3
Market share:
Formula: Market Share = (Total sales of the business ÷ Total sales of the market) X100
This can be defined as the proportion of total market sales achieved by one business. Increased
market share can bring about many benefits to the business such as increased customer loyalty,
setting up of brand image, etc.
Productivity:
Formula: Productivity = Output ÷ Quantity of Input
Shows how efficiently resources are used, found by dividing the total output by the quantity of
input used in production.
Unit 2:
Labor Productivity:
Formula: Labor Productivity = Output ÷ Number of Employees
Assesses how efficiently labor is used, calculated by dividing total output by the number of
employees.
Unit 4:
Revenue:
Formula: Revenue = Quantity Sold × Price
Measures the total income generated from selling goods or services, calculated by multiplying
the quantity sold by the price per unit.
Total Costs:
Formula: Total Costs = Fixed Costs + Variable Costs
The overall expenses to produce goods or services, determined by adding fixed costs to
variable costs.
Average Cost:
Formula: Average Cost = Total Costs ÷ Total Units Produced
Shows the cost per unit produced, calculated by dividing total costs by the number of units
produced.
Profit:
Formula: Profit = Revenue −Total Cost
Measures the financial gain from business activities, found by subtracting the total cost from
total revenue.Shows how much profit is made after covering all costs.
Break-even Point:
1
Formula: Break-even Point = Fixed Costs ÷ Contribution per Unit
The point where a business covers its fixed costs, calculated as fixed costs divided by the
contribution per unit.
Contribution per Unit:
Formula: Contribution per Unit = Selling Price − Variable Costs
Measures the profit made on each unit sold after deducting variable costs from the selling price.
Margin of Safety:
Formula: Margin of Safety = Maximum Output − Break-even Output
Indicates how much actual production exceeds the break-even point, providing a buffer before
losses start.
Unit 5:
Gross Profit:
Formula: Gross Profit = Revenue − Cost of Sales
Shows the profit from sales after deducting the cost of goods sold (direct costs).
Gross Profit Margin:
Formula: Gross Profit Margin = (Gross Profit ÷ Revenue) × 100
Expresses the gross profit as a percentage of revenue, showing profitability before other
expenses.
Net Profit:
Formula: Net Profit = Gross Profit − Expenses
Represents the total profit after all expenses, both fixed and variable, are deducted from gross
profit.
Net Profit Margin:
Formula: Net Profit Margin = (Net Profit ÷ Revenue) × 100
Indicates how much of the revenue remains as profit after all expenses, expressed as a
percentage.
Return on Capital Employed (ROCE):
Formula: ROCE = (Net Profit ÷ Capital Employed) × 100
Shows how efficiently the company generates profit from its capital investments.
Working Capital:
Formula: Working Capital = Current Assets − Current Liabilities
Indicates the short-term financial health of a business, showing the difference between current
assets and current liabilities.
2
Capital Employed (or Shareholder's funds):
Formula: Capital Employed = Total Assets − Total Liabilities
Represents the total capital invested in the business, calculated as total assets minus total
liabilities.
Current Ratio:
Formula: Current Ratio = Current Assets ÷ Current Liabilities
A liquidity measure that compares current assets to current liabilities to assess the ability to
meet short-term obligations.
Acid Test Ratio (or Quick Ratio):
Formula: Acid Test Ratio = (Current Assets − Inventory) ÷ Current Liabilities
A stricter liquidity measure that excludes inventory from assets to assess whether a company
can meet short-term liabilities without selling inventory.
Cash Inflow:
Formula:Add - Sales revenue + Overdrafts (if any)
Total of all sales and other sources of finance received during a period of time
Cash Outflow:
Formula:Add all expenses - rent, wages, salary, utility bills, maintenance expenses,
transportation cost, loan repayment (EMI)
(tax is not part of this expense list because tax is a yearly payment and comes on the income
statement )
Total of all sales and other sources of finance received during a period of time
Netflow:
Formula:Cash Inflow - Cash Outflow
Subtract cash inflow from cash outflow. If the number is negative then you should put it in
brackets.
Opening Balance:
Money available at the beginning of the month - it is the closing balance that is carried forward
from the previous month.
Closing balance:
Formula: Opening balance + Netflow.
If the number is negative then it should be written in brackets.
