IB BUSINESS FORMULAS
Sales of 1 product
𝑀𝑎𝑟𝑘𝑒𝑡 𝑠ℎ𝑎𝑟𝑒 = x 100
Total market share
Change in size
𝑀𝑎𝑟𝑘𝑒𝑡 𝑔𝑟𝑜𝑤𝑡ℎ = x 100
Original size
Change in sales
𝑆𝑎𝑙𝑒𝑠 𝑔𝑟𝑜𝑤𝑡ℎ = x 100
Original sales
𝑃𝑟𝑜𝑓𝑖𝑡 = Total revenue − Total costs
𝑃𝑟𝑜𝑓𝑖𝑡 𝑢𝑠𝑖𝑛𝑔 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 = Total contribution − Fixed costs
𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = Selling price x number of units sold
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡𝑠 = Fixed costs + Variable costs
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 = Selling price per unit − Variable costs per unit
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 = Contribution per unit x Number of units sold
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 = (Price − Variable costs) x Quantity
Fixed costs
𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 =
Contribution per unit
𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑓 𝑠𝑎𝑓𝑒𝑡𝑦 = Current output − Break even output
𝑇𝑜𝑡𝑎𝑙 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠 = Variable cost per unit x Number of units sold
Costs of goods
𝑆𝑎𝑙𝑒𝑠 𝑔𝑟𝑜𝑤𝑡ℎ = Selling price −
Services bought
𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 = Sales − Cost of sales (variable costs)
Gross profit
𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 = x 100
Sales revenue
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 = Sales − Costs of sales − Operating expenses
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 = Gross profit − Overhead expenses
Operating profit
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 = x 100
Sales revenue
Net profit
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 = x 100
Capital invested
Return on investment
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑 = x 100
Cost of investment
Number of staff leaving
𝐿𝑎𝑏𝑜𝑟 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = x 100
Average staff
Total value of output
𝐿𝑎𝑏𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = x 100
Total number of employees
Number of staff absent on 1 day
𝐿𝑎𝑏𝑜𝑟 𝑎𝑏𝑠𝑒𝑛𝑡𝑒𝑒𝑖𝑠𝑚 = x 100
Average staff
Current output
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑢𝑛𝑖𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = x 100
Maximum output
Total costs
𝑈𝑛𝑖𝑡 𝑐𝑜𝑠𝑡𝑠 =
Output
Total labor costs
𝐿𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 =
Unit of output
% change in demand
𝑃𝐸𝐷 =
% change in price
Number of issued shares
𝑀𝑎𝑟𝑘𝑒𝑡 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 =
Current market price
𝑃𝑟𝑜𝑓𝑖𝑡 𝑜𝑓 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟 = Operating profit − (Interest costs + Tax)
Number of employees at the end of period − Number of leavers
𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑒 𝑟𝑒𝑡𝑒𝑛𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 = x 100
Number of employees at end
Operating profit
𝑅𝑂𝐶𝐸 = x 100
Equity + Non current liabilities
Fixed costs
𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 =
Contribution per unit
Current asset
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
Current liabilities
Non current liabilities
𝐺𝑒𝑎𝑟𝑖𝑛𝑔 = x 100
Equity + Non current liabilities
Payables
𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑑𝑎𝑦𝑠 = x 365
Cost of sales
Receivables
𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑑𝑎𝑦𝑠 = x 365
Sales
Cost of goods sold
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =
Average inventory
(Costs of project or investment)
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 =
Annual cash inflows
Annual profit (Net cash flow)
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 (𝐴𝑅𝑅) = x 100
Initial capital cost
Annual profit (Net cash flow)
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 (𝐴𝑅𝑅) = x 100
Average capital cost
𝑁𝑒𝑡 𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 (𝑁𝑃𝑉) = Net cash flow x Discount factors − Original investment
(Initial capital cost − Residual capital value
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 =
2
Lower discount rate + NPV at lower rate
𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 (𝐼𝑅𝑅) = x (Higher rate − Lower rate)
PV at lower rate − PV at higher rate
Current assets − Inventories
𝐴𝑐𝑖𝑑 𝑡𝑒𝑠𝑡 𝑟𝑎𝑡𝑖𝑜 =
Current liabilities
Output
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
Capital employed
