Formula Library

Formula

Revenue = Price x Volume

How to use it

Revenue is the total sales value created by selling a number of units at a given price.

Example

Selling 12,000 units at $25 each creates $300,000 in revenue.

Formula

Profit = Revenue - Cost

How to use it

Profit is the amount left after subtracting all relevant costs from revenue.

Example

If revenue is $500,000 and cost is $380,000, profit is $120,000.

Formula

Margin = Profit / Revenue

How to use it

Margin shows profit as a percentage of revenue, which makes profitability easier to compare.

Example

A $90,000 profit on $600,000 of revenue is a 15% margin.

Formula

Market Share = Company Sales / Total Market Sales

How to use it

Market share compares a company's sales with the total sales in the market.

Example

$45M of company sales in a $300M market equals 15% market share.

Formula

Total Cost = Fixed Cost + Variable Cost per Unit x Units

How to use it

Total cost combines costs that do not vary with volume and costs that scale with each unit sold.

Example

$200,000 fixed cost plus $8 variable cost across 25,000 units equals $400,000 total cost.

Formula

Contribution Margin = Price - Variable Cost per Unit

How to use it

Contribution margin is the amount each unit contributes toward fixed costs and profit.

Example

A $30 price with $18 variable cost leaves $12 of contribution margin per unit.

Formula

Breakeven Volume = Fixed Cost / Contribution Margin

How to use it

Breakeven volume is the number of units needed for contribution margin to cover fixed cost.

Example

$240,000 of fixed cost divided by $12 contribution margin requires 20,000 units to break even.

Formula

ROI = (Gain - Investment) / Investment

How to use it

ROI compares net gain with the original investment to estimate return efficiency.

Example

A $150,000 gain on a $100,000 investment produces a 50% ROI.

Formula

Payback Period = Initial Investment / Annual Cash Flow

How to use it

Payback period estimates how many years it takes for cash flow to recover an upfront investment.

Example

A $300,000 investment with $75,000 annual cash flow has a 4-year payback period.

Formula

Percentage Change = (New - Old) / Old

How to use it

Percentage change measures the size of an increase or decrease relative to the starting value.

Example

Growing from 80 to 100 is a 25% increase because 20 divided by 80 equals 25%.

Formula

CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1

How to use it

CAGR is the steady annual growth rate that would turn the beginning value into the ending value.

Example

Doubling from $50M to $100M over 4 years is about 19% annual growth.

Formula

Years to Double = 72 / Growth Rate

How to use it

The Rule of 72 approximates doubling time when the growth rate is expressed as a percent.

Example

At 12% annual growth, doubling takes about 6 years because 72 divided by 12 equals 6.

Formula

Weighted Average = Sum(weight x value) / Sum(weights)

How to use it

A weighted average gives each value influence in proportion to its weight.

Example

70 units at $10 and 30 units at $20 produce a weighted average price of $13.

Formula

Capacity Utilization = Actual Output / Maximum Capacity

How to use it

Capacity utilization shows how much of available capacity is being used.

Example

Producing 72,000 units out of 90,000 possible units means 80% capacity utilization.