# IGCSE Business Formulas

This guide will serve as a complete list of all formulas for IGCSE Business Studies.

**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.

**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.

**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.

**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.

**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.

**Profit:**

Formula: `Profit = Revenue − Cost of Sales`

Measures the financial gain from business activities, found by subtracting the cost of sales from total revenue.

**Profit (from Break-even graph):**

Formula: `Profit = Total Revenue − Total Costs`

Shows how much profit is made after covering all costs, calculated by subtracting total costs from total revenue.

**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.

**Break-even Point:**

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.

**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.

**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.