Key Business Calculations and Performance Metrics
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Revenue and Cost Formulas
- Revenue = Selling price per unit × Number of units sold
- Variable costs = Variable cost per unit × Number of units sold
- Total costs = Fixed costs + Variable costs
- Profit = Total revenue − Total costs or Total contribution − Fixed costs
Market and Investment Metrics
- Market capitalisation = Number of issued shares × Current share price
- Expected value (A & B) = (Pay-off of A × Probability of A) + (Pay-off of B × Probability of B)
- Net gain = Expected value − Initial cost of decision
- Market growth (%) = (Change in market size / Original market size) × 100
- Market share (%) = (Sales of one product or business / Total sales in the market) × 100
- Added value = Sales revenue − Cost of bought-in goods and services