Question 1
The break-even chart shows a business's costs and revenue. What is its break-even output?
IGCSE Business calculations and formulas
The 0264 syllabus lists its formulas. Learn these, and check your working on the free calculators.
| Break-even output | Fixed costs ÷ contribution per unit |
|---|---|
| Margin of safety | Actual sales minus break-even sales, in units |
| Profit margin | Profit ÷ revenue × 100 |
| Current ratio | Current assets ÷ current liabilities |
Check your working: Break-even calculator · Cash flow forecast calculator · Profit margin calculator
Costs, output and marketing
- Market share = the business's sales revenue ÷ the market's total sales revenue × 100. Labour productivity = output per period ÷ number of employees.
- Total cost = total fixed costs + total variable costs; average cost = total cost ÷ number of units.
- Contribution per unit = selling price per unit minus variable cost per unit.
Finance
- Revenue = price × units sold. Gross profit = revenue minus cost of sales. Profit = total revenue minus total costs, or gross profit minus expenses.
- Gross profit margin and profit margin: each profit ÷ revenue × 100. ROCE = profit ÷ capital employed × 100.
- Working capital = current assets minus current liabilities. Acid test ratio = (current assets minus inventory) ÷ current liabilities.
What is not tested
You amend, complete and read cash flow forecasts and financial statements, but you are not asked to build one from nothing, and there are no exchange-rate calculations.
Try 2 questions
Question 2
| Business | Profit (dollars) | Capital employed (dollars) |
|---|---|---|
| A | 50 000 | 400 000 |
| B | 30 000 | 200 000 |
The table shows information about two cleaning businesses. Which business gives the better return on the capital invested in it?
Next step
Questions people ask
Do I get a formula sheet in the exam?
Plan to know them: the syllabus lists them for teaching, so learn each one and when to use it.
Can a ratio be written as a number?
Yes. The current and acid test ratios may be given as x : 1 or as a number.