All Formulas

2.4 - Labour Turnover (HL only) - Labour turnover refers to the amount of people who
leave an organization, expressed as a percentage of the workforce, per time period (usually
one year).
The labour turnover rate per time period is calculated by using In some industries labour turnover is more commonplace, such as
the formula: fast-food and supermarkets, it can be more useful to calculate the
monthly labour turnover rate. In such cases, the following formula
is used:

For example: For example, if a school employs 90 teachers For example: For example, if a franchised fast-food restaurant
during the academic year, but 10 of them leave during the business has 45 employees at the start of this month and 55
year (for whatever reason), the school has a turnover rate of: workers at the end of this month, with 10 employees who left
during the month, its monthly turnover rate would be calculated as:
(10 / 90) × 100 = 11.1%
● Employees who have left = 10
● Average size of workforce = (45 + 55) / 2 = 50
● Labour turnover rate = 10 / 50 = 20%

As the business has a labour turnover rate of 20%, this means that
for every 50 employees hired at the restaurant, an average of 10
people leave each month.
 Layout Calculation
3.4 The Profit
Sales Revenue Price x Quantity (output)
and Loss
Cost of Goods Sold VC or cost per unit x Quantity (output)
account
Gross Profit Sales revenue - cost of goods sold.

Expenses Total expenses

Profit before interest and tax Gross profits - expenses

Interest This could be stated or you may have to work this out
as a percentage of a given amount.

Profit before tax Profit before interest and tax - interest

Tax This could be stated or you may have to work this out
as a percentage of a given amount.

Profit for period Profit before tax - tax

Dividends This could be stated or you may have to work this out
as a percentage of a given amount.

Retained profit Profit for period - dividends

3.4 The Non current assets = Non current assets - depreciation

Balance
Current assets = sum of all current assets
Sheet
Total assets = Non current assets + current assets

Current liabilities = sum of all current liabilities

Non current liabilities = sum of all non current liabilities

Total liabilities = current liabilities + non current liabilities

Net assets = Total assets - Total liabilities

Total equity = Share capital + retained profit

 3.4 Depreciation (HL only)
Straight line method:

Units of production
method:
3.5 Profitability ratios
3.5 Liquidity ratios
3.6 Efficiency ratios (HL only)
3.6 Efficiency ratios (HL only)
3.6 Efficiency ratios (HL only)
3.7 Cash flow forecasts

Total inflows = the sum of all inflows

Total outflows = the sum of all outflows

Net cash flow = inflows minus outflows

Opening balance = the closing balance of the

previous month

Closing balance = Opening balance + net cash flows

 3.8 Investment appraisal

Year Annual net cash flows Cumulative cash flows

($) ($)

0 (2,000,000) (2,000,000)
Annual cash flow in the payback year
1 350,000 (1,650,000)

2 400,000 (1,250,000)

3 500,000 (750,000)

4 600,000 (150,000)

5 750,000
3.8 Investment Appraisal
3.8 Investment Appraisal (HL only)

Year Net cash flow ($) Discount factor at 6% Present value ($)

0 (150,000) 1 (150,000)

1 25,000 0.9434 23585

2 30,000 0.89 26700

3 35,500 0.8396 29805.80

4 37,000 0.7921 29307.70

5 39,800 0.7473 29742.54

6 41,200 0.705 29046

Net Present Value = 18187.04

 3.9 Budgets (HL only)

Variance - the difference between the budgeted figure and the actual amount
5.5 Break Even
Fixed Costs
Break even quantity = Selling price - variable costs

Contribution = Selling price - variable costs

Fixed Costs
Break even quantity = Contribution
5.5 Break even
X axis = the total level of output

Y axis = multiply the selling price by total output to

see how high the Y axis should go

Variable costs = VC x output

Total costs = FC + VC

Sales revenue = SP x output

Margin of safety = total output - break even quantity

5.5 Break even
Calculating profit

Profit = sales revenue - total variable cost - fixed cost

Profit = (SP- output) - (VC x output) - fixed cost

Use substitution of the above formula to find out the following:

● the number of dolls that DD needs to sell to achieve a profit of $4000.

○ 4000 = 50x - 30x - 10,000
● the profit or loss in the first year if DD sells 400 dolls (show all your working).
○ Profit = (50 x 400) - (30 x 400) - 10,000
● Assuming that the quantity of dolls to be sold in the second year is 550 and costs remain
unchanged, calculate the price per doll that DD would need to charge to make a $6500 profit.
○ 6500 = 550x - (30 x 550) - 10,000

In each exam you need to rearrange to find x.

Business Management Toolkit: Decision Trees

Expected values = (estimated revenue x probability)+(estimated revenue x probability) - cost

Option 1 = (20m x 0.6) + (8m x 0.4) - 10m = 5.2m

Option 2 = (10m x 0.6) + (7m x 0.4) - 0 = 8.8m

Business Management Toolkit: Critical Path Analysis

Estimated start time (EST)

0 4 5 10 14 21
0 4 5 10 14 21
Latest finish time (LFT)

EST = EST from the previous node + time length of the task
LFT = LFT from the next node - time length of the task
Free Float = EST of next task - EST of this task - length of this task
Free float of task C = EST of task E – EST of task C – length of task C
= 10 days – 5 days – 2 days = 3 days –> This means that Task C can be delayed up to 3 days
and the entire project will still run on time.
Business Management Toolkit: Descriptive Statistics
● Mean is another word for average. The mean is ● Standard deviation – sometimes written using the
found by adding together two or more numbers Greek letter sigma (σ) – looks at the dispersion of
and dividing the total by the number of items. data around its mean. A high standard deviation
● Mode refers to the most frequently occurring indicates that the data is spread out. A low
value from a set of values. standard deviation indicates that the data is
● Median is the middle value in a list of ordered clustered around the mean
numbers.
● Quartiles result from dividing a set of numbers
into quarters. For example, a country’s income
data might be represented by looking at:
● the lowest 25% of income earners
● the second lowest 25% of income earners
● the second highest 25% of income earners
● the highest 25% of income earners