Calculations Formula Sheet Average unit Costs Topics Economies

Calculations Formula Sheet Average unit Costs Topics: Economies of scale, production unit cost = total costs total output (quantity sold) Profit, Costs and Revenue Topics: Business Planning, Finance Total Costs = Variable Costs + Fixed Costs Total Revenue = Quantity Sold x Selling price Profit /(Loss) = Total Revenue – Total Costs Percentage change Topics: Any Percentage change = new - old x 100 original Interest and Exchange Rates Topic: External (economic) influences on a business Exchange rate To change British money to foreign money multiply by the exchange rate. Foreign currency = British currency x exchange rate To change back to British money you divide by the exchange rate. British money = foreign currency/exchange rate Interest Total Loan amount x percentage (converted into a decimal) e. g. £ 8000 x 4. 2% (0. 042)

Paper 2 Financial calculations and interpretations Cash Flow Net Cash Flow = Total inflows-Total outflows Closing balance = opening balance + net cash flow Break-even You don’t need to calculate this but do need to be able to identify the break-even level of output and margin of safety form a break-even chart Average rate of return (ARR) – to help a business decide whether or not to invest in a project (Average annual profit/cost of investment) x 100 A higher figure is preferred as it shows the return on investment is greater Break even is: a level of production (or output) at which revenue from sales = total costs of production Analysing the financial performance of a business Gross profit = Sales revenue - cost of sales Operating profit = gross profit – overheads Net profit = Operating profit – Tax and interest payments Gross profit margin = gross profit/revenue x 100 Net profit margin = net profit/revenue x 100