A Level formula sheet

Formula: Answer given as: Used for:

Gross profit margin (ratio) % To compare how well the gross profit is doing
= gross profit. X100 between years or competitors. The higher the better.
Sales revenue
Operating profit margin (ratio) % To compare how well the operating profit is doing
= operating profit. X 100 between years or competitors. The higher the better.
Sales revenue We use the operating profit BEFORE tax
Current ratio A number To show whether or not the business has sufficient
= current assets compared to current assets to repay their current liabilities. A good
Current liabilities 1 answer is between 1.5 and 2
Eg answer:1
Acid test ratio A number:1 To show whether the business has sufficient liquid
= current assets – inventories assets to repay its short term liabilities. A good
Current liabilities answer is between 1.2 and 1.5
Working capital = Number How much cash the business has to pay their running
Current assets – current liabilities costs and possibly an emergency expense
ROCE = % The higher the better but compare with previous
Operating profit. X 100 years or another business
Capital employed
Depreciation = Monetary Tells you how much you should reduce the value of
Original cost of asset – residual value value the asset by each year in the balance sheet. This
Useful life of asset amount is also recorded as an expense on the income
statement.
Break-even point Number of How many items you need to sell in order to cover all
= Fixed costs units costs. The point at which you neither make a profit or
Unit selling price – unit variable cost loss.
If the answer is a fraction DO NOT round up or down.
Margin of safety Number of How many units is the business making over and
= current level of output – break-even units above the BEP
point
Market share % This tells you which business has the most sales
= total sales of business X 100 within a market, who the market leader is.
Total sales of industry
Income elasticity of demand A number Shows if a good is normal (the answer is positive and
= %change in demand for a product between 0 and 1) or an inferior good (the answer is
% change in consumer incomes negative)
Labour turnover % A high figure is an indication of low morale in the
= number of staff leaving in 1yr X100 workforce
Average number of people employed
Labour productivity Number of The higher the figure is the better it is for the business
= total output in a time period units per as this helps to keep cost per unit low
Total workers employed worker
Absenteeism % An indication of staff morale
= no. of employees absent X 100
Total no. of employees
Price elasticity of demand Number Between 0 and 1 inelastic demand
= % change in quantity demanded Above 1 is elastic demand
% change in price
Promotional elasticity of demand Number If the result is greater than 1 the demand is said to be
= % change in demand for product elastic following a change in spending on promotion
% change in promotional spending
Cross elasticity = Number If the result is negative then the 2 goods are
% change in demand for good A complements
% change in price of good B If the result is positive it means they are substitutes
A Level formula sheet
Capital productivity = Number Allows the business to see how much machinery is
Output contributing to production levels
Capital employed
Total float = Number The amount of time an activity can be delayed
LFT – duration - EST without delaying the whole project duration.
Free float = Number The length of time an activity can be delayed without
EST (next activity) – duration – EST (this delaying the start of the following activities.
activity)
Contribution = Number How much an item is contributing towards paying off
Selling price – variable costs fixed costs or profit if costs have been paid
Capital employed = Number Remember shareholders equity is share capital plus
(non-current assets + current assets) – retained earnings
current liabilities
OR
Non-current liabilities + shareholders
equity
Inventory turnover ratio = Number How many times a year the stock is replaced, with JIT
Cost of goods sold stock control you expect a high number
Value of inventories
Days sales in receivables ratio = Number of Tells you how long it takes the business to collect
Trade accounts receivables X 365 days money that is owed to them. Shorter is better for
revenue cashflow and shows good management.
Payables days = Number of Tells you how long it takes the business to pay their
Trades payables X 365 days bills to suppliers. If this is too high it might damage
Cost of sales the relationship with their supplier.
Dividend yield ratio = % The rate of return for the shareholder at the current
Dividend per share. X 100 share price.
Current share price
Dividend per share = Monetary How much a shareholder can expect to receive in
Total annual dividends. value dividends per share that they own
Total number of shares issued
Dividend cover ratio = Number This is the number of times the share dividend could
Profit for the year have been paid out of the profits. If it is high the
Annual dividends shareholders will question why they were not given
more.
Price earnings ratio = Number To calculate earnings per share it is profit for the
Current share price year / number of shares issued
Earnings per share
It reflects the confidence that shareholders have in
the future prospects of the business.
Gearing = % Tells you the degree to which the business is financed
Non-current liabilities X 100 by long term loans
Shareholders equity + non-current
liabilities