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Every formula you need, explained simply — with interactive calculators and exam-style practice questions to test yourself.

📋 Your Complete Formula Sheet

These formulas are NOT given to you in the exam — you need to remember them. Bookmark this page and test yourself regularly.

⚠️ Always show your workings! Even if your final answer is wrong, you can still pick up method marks if the examiner can see your steps.

Theme 1 Formulas

Revenue
Price × Quantity Sold
Total money coming in from sales — before any costs are taken off.
Total Costs
Fixed Costs + Variable Costs
Add up all the costs — those that don't change (fixed) and those that do (variable).
Profit / Loss
Revenue − Total Costs
Positive = profit. Negative = loss. Simple!
Variable Costs (Total)
Variable Cost per Unit × Quantity
Multiply the cost to make one unit by how many you make.
Break-Even Output
Fixed Costs ÷ (Price − Variable Cost per Unit)
The (Price − VC per unit) part is called "contribution per unit".
Margin of Safety
Actual Output − Break-Even Output
How much sales could fall before you start making a loss.
Interest on a Loan
Loan Amount × Interest Rate ÷ 100
This gives you the yearly interest charge. Multiply by years for the total.
Cash Flow (Net)
Cash Inflows − Cash Outflows
Money coming in minus money going out in a given month.
Closing Balance
Opening Balance + Net Cash Flow
The opening balance next month = this month's closing balance.

Theme 2 Formulas

Gross Profit
Revenue − Cost of Sales
Cost of sales = direct costs only (materials, labour to make the product).
Net Profit
Gross Profit − Expenses
Expenses = overheads like rent, marketing, admin — costs not directly tied to making the product.
Gross Profit Margin
(Gross Profit ÷ Revenue) × 100
Expressed as a %. A higher % means more of each pound of sales becomes gross profit.
Net Profit Margin
(Net Profit ÷ Revenue) × 100
Shows how much of every pound of sales the business actually keeps as final profit.
Average Rate of Return (ARR)
(Average Annual Profit ÷ Initial Investment) × 100
Average annual profit = total profit over all years ÷ number of years.
Percentage Change
((New − Old) ÷ Old) × 100
Positive = increase. Negative = decrease. Works for prices, sales, costs — anything!
Market Share
(Business Sales ÷ Total Market Sales) × 100
Expressed as a %. Shows how much of the total market a business controls.
Average (Mean)
Sum of All Values ÷ Number of Values
Add everything up, then divide by how many items there are.

Costs & Revenue

These are the building blocks — everything else is built on top of these.

Revenue = Price × Quantity Sold
Total money received from sales. Doesn't account for any costs yet.
Total Costs = Fixed Costs + Variable Costs
Variable Costs = Variable Cost per Unit × Quantity Produced

Fixed costs stay the same no matter how much you produce — rent, insurance, manager salaries.
Variable costs go up as you produce more — raw materials, packaging, delivery.

🧮 Revenue Calculator

Work out total revenue

Total Revenue

Work out total costs

Total Costs

📝 Practice Questions — Costs & Revenue

SnackBox Ltd sells healthy snack boxes at £12 each. Last month they sold 3,400 boxes. What was their total revenue?
2 marks
Revenue = Price × Quantity
Revenue = £12 × 3,400
Revenue = £40,800
GymGear Ltd has fixed costs of £15,000 per month. Their variable cost per unit is £6 and they produce 2,000 units this month. Calculate their total costs.
3 marks
Variable Costs = £6 × 2,000 = £12,000
Total Costs = Fixed Costs + Variable Costs
Total Costs = £15,000 + £12,000
Total Costs = £27,000

Profit, Gross Profit & Margins

Profit = Revenue − Total Costs
Gross Profit = Revenue − Cost of Sales
Cost of Sales = direct costs only (materials, production labour)
Net Profit = Gross Profit − Expenses
Expenses = overheads: rent, admin, marketing, interest payments
Gross Profit Margin = (Gross Profit ÷ Revenue) × 100
Net Profit Margin = (Net Profit ÷ Revenue) × 100

Why do margins matter? A business might have huge gross profit in pounds but if its margin is low, it's not very efficient. A 5% net profit margin means for every £1 of sales, only 5p is actual profit. Margins let you compare businesses of different sizes fairly.

🧮 Profit Margin Calculator

Calculate gross profit & net profit margins

Results

📝 Practice Questions — Profit & Margins

StyleHub had revenue of £480,000 last year. Their cost of sales was £192,000. What was their gross profit margin? Give your answer to 1 decimal place.
3 marks
Gross Profit = Revenue − Cost of Sales
Gross Profit = £480,000 − £192,000 = £288,000
Gross Profit Margin = (£288,000 ÷ £480,000) × 100
Gross Profit Margin = 60%
Using the data below, calculate TechCo's net profit margin for 2024.
4 marks
ItemAmount
Revenue£850,000
Cost of Sales£340,000
Expenses£255,000
Gross Profit = £850,000 − £340,000 = £510,000
Net Profit = Gross Profit − Expenses = £510,000 − £255,000 = £255,000
Net Profit Margin = (£255,000 ÷ £850,000) × 100
Net Profit Margin = 30%

Break-Even Analysis

The break-even point is the number of units a business needs to sell so that its revenue exactly equals its total costs — it's making neither a profit nor a loss.

Contribution per Unit = Selling Price − Variable Cost per Unit
Break-Even Output = Fixed Costs ÷ Contribution per Unit
Margin of Safety = Actual Output − Break-Even Output
How many units output can fall by before the business makes a loss

Quick example: Fixed costs = £10,000. Selling price = £50. Variable cost per unit = £30.
Contribution per unit = £50 − £30 = £20.
Break-even = £10,000 ÷ £20 = 500 units.
If the business currently sells 650 units, the margin of safety = 650 − 500 = 150 units.

🧮 Break-Even Calculator

Calculate break-even point & margin of safety

Results

📝 Practice Questions — Break-Even

BakeRight Ltd makes artisan bread. Their fixed costs are £6,000 per month. Each loaf sells for £4 and has a variable cost of £1.50. Calculate the break-even output.
3 marks
Contribution per unit = £4.00 − £1.50 = £2.50
Break-even = Fixed Costs ÷ Contribution per unit
Break-even = £6,000 ÷ £2.50
Break-even = 2,400 loaves
BakeRight Ltd currently sells 3,100 loaves per month. Using your break-even answer above (2,400 units), calculate the margin of safety.
2 marks
Margin of Safety = Actual Output − Break-Even Output
Margin of Safety = 3,100 − 2,400
Margin of Safety = 700 loaves

Cash Flow Forecasts

Cash flow shows the money coming into and out of a business each month. A profitable business can still run out of cash — so monitoring this is crucial.

Net Cash Flow = Total Inflows − Total Outflows
Closing Balance = Opening Balance + Net Cash Flow
This month's closing balance becomes next month's opening balance

Inflows = money coming IN: sales revenue, loans received, investment.
Outflows = money going OUT: wages, rent, raw materials, loan repayments, marketing.

📊 Cash Flow Table — Practice

Fill in the missing values for FreshBloom, a flower shop. Click "Check answers" when done.

Item Jan Feb Mar
Sales Revenue£8,000£6,500£9,200
Other Inflows£1,000£0£500
Total Inflows £6,500
Wages£3,200£3,200£3,200
Stock / Materials£2,100£1,800£2,400
Rent & Overheads£1,500£1,500£1,500
Total Outflows £6,800 £7,100
Net Cash Flow
Opening Balance£500
Closing Balance

Average Rate of Return (ARR)

ARR tells you how profitable an investment is as a percentage of its cost. Businesses use it to compare two different investment options and choose the better one.

ARR = (Average Annual Profit ÷ Initial Investment) × 100

Step-by-step:
1. Work out the total profit from the investment over its whole life (total returns − initial cost)
2. Divide by the number of years to get average annual profit
3. Divide by the initial investment and multiply by 100 to get the %

How to use it: If investment A has an ARR of 18% and investment B has an ARR of 12%, choose A — it returns more profit per pound invested per year.

🧮 ARR Calculator

Calculate Average Rate of Return

Average Rate of Return

📝 Practice Question — ARR

RoboClean Ltd is deciding whether to buy new packaging machinery for £40,000. It is expected to generate the following returns:
4 marks
YearNet Return
Year 1£12,000
Year 2£14,000
Year 3£16,000
Year 4£18,000

Calculate the ARR of the machinery investment. Give your answer to 1 decimal place.

Total Returns = £12,000 + £14,000 + £16,000 + £18,000 = £60,000
Total Profit = Total Returns − Initial Investment = £60,000 − £40,000 = £20,000
Average Annual Profit = £20,000 ÷ 4 years = £5,000
ARR = (£5,000 ÷ £40,000) × 100
ARR = 12.5%

Percentage Calculations

Percentages come up all over the exam — in market share, percentage change, interest calculations, and more.

Percentage Change = ((New Value − Old Value) ÷ Old Value) × 100
Positive = increase. Negative = decrease (a fall).
Market Share = (Business Revenue ÷ Total Market Revenue) × 100
Interest on a Loan = Loan Amount × (Interest Rate ÷ 100)
This gives the annual interest. Multiply by years for total interest paid.
Average (Mean) = Sum of All Values ÷ Number of Values

🧮 Percentage Calculators

Percentage Change

Percentage Change

Market Share

Market Share

📝 Practice Questions — Percentages

FitLife had revenue of £320,000 in 2023. In 2024 their revenue rose to £384,000. Calculate the percentage increase in revenue.
2 marks
Percentage Change = ((New − Old) ÷ Old) × 100
= ((£384,000 − £320,000) ÷ £320,000) × 100
= (£64,000 ÷ £320,000) × 100
= 20% increase
The UK trainer market is worth £2.4 billion. SpeedStep has annual sales of £180 million. What is SpeedStep's market share?
2 marks
Market Share = (Business Sales ÷ Total Market Sales) × 100
= (£180m ÷ £2,400m) × 100
= 7.5%

🎯 Mixed Practice — Exam Style

These questions mix everything together just like the real exam. Work through them all, show your working, then check your answers.

NOVA BIKES LTD
Nova Bikes makes electric scooters. Selling price: £350 per unit. Variable cost per unit: £140. Fixed costs: £84,000/month. Last month they produced and sold 450 scooters.
Multi-part

(a) Calculate Nova Bikes' total revenue last month. [2]

Revenue = £350 × 450
Revenue = £157,500

(b) Calculate the break-even output for Nova Bikes. [2]

Contribution = £350 − £140 = £210
Break-even = £84,000 ÷ £210
Break-even = 400 scooters

(c) Calculate the margin of safety. [2]

Margin of Safety = 450 − 400
Margin of Safety = 50 scooters
NOVA BIKES LTD — Financial Accounts
Nova Bikes' annual accounts show: Revenue £1,890,000 · Cost of Sales £756,000 · Operating Expenses £472,500.
Multi-part

(d) Calculate the gross profit margin. [2]

Gross Profit = £1,890,000 − £756,000 = £1,134,000
GPM = (£1,134,000 ÷ £1,890,000) × 100
GPM = 60%

(e) Calculate the net profit margin. [2]

Net Profit = £1,134,000 − £472,500 = £661,500
NPM = (£661,500 ÷ £1,890,000) × 100
NPM = 35%
🏆 Top exam tip: Always show your workings. Examiners will award 1 mark if they can see the correct answer in your workings, even if you have not put the correct answer on the answer line.