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A-Level Business · Reference Pack
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Calculation
Cheat Sheet

All 26 calculations a Year 12 or Year 13 Business student needs, with worked examples using real UK businesses. AQA 7132, Edexcel 9BS0, OCR H431.

26
Formulas
5
Sections
8
Worked examples
3
Exam boards mapped
6
Print-ready pages
Section 1
Revenue, Costs & Profit
7 formulas · Theme 2 / Unit 3
Section 2
Margins & Ratios
6 formulas · Theme 2 / Unit 3
Section 3
Break-even & Contribution
4 formulas · Theme 2 / Unit 3
Section 4
Cash Flow & Working Capital
5 formulas · Theme 2 / Unit 3
Section 5
Investment Appraisal
4 formulas · Theme 3 / Unit 3
Bonus
Worked Examples
Real UK businesses · Greggs, M&S, JD Sports
Pages
6 · print-ready
Boards
AQA · Edexcel · OCR
Year
Y12 / Y13
The Business School
thebusiness.school

Section 1 · Revenue, Costs & Profit

The seven core formulas that underpin every other calculation in A-Level Business.

AQA: 3.5 Financial performance Edexcel: Theme 2.2 / 2.3 OCR: Unit 3 Finance
1Total Revenue
Revenue = Price × Quantity sold
Also called sales revenue or turnover. Top line of every income statement.
2Total Costs
Total costs = Fixed costs + Variable costs
Fixed = rent, salaries, insurance. Variable = stock, ingredients, packaging — scales with output.
3Total Variable Cost
TVC = Variable cost per unit × Quantity
Sometimes called direct costs. Excludes overheads.
4Gross Profit
Gross profit = Revenue − Cost of sales
Cost of sales = direct costs only (not overheads). First profit line.
5Operating Profit
Operating profit = Gross profit − Overheads
Also called EBIT in business journalism. Profit from trading before interest and tax.
6Net Profit (Profit for the year)
Net profit = Operating profit − Interest − Tax
Bottom line. What the business actually keeps.
7Profit (general)
Profit = Total revenue − Total costs
The simplest profit definition — used when the question does not distinguish layers.
Mark losses to avoid Showing units in £ (or vice versa) · Mixing gross and operating profit · Forgetting to subtract interest in net profit
The Business School · Calculation Cheat Sheet
02 / 06

Section 2 · Margins & Ratios

The six margin and ratio calculations examiners expect at A-Level.

AQA: 3.5 Financial performance Edexcel: Theme 2.3 Managing finance OCR: Unit 3 Finance
8Gross Profit Margin
GP margin (%) = (Gross profit ÷ Revenue) × 100
A retailer like JD Sports might run 50% gross. A discounter like Lidl might run 8–12%.
9Operating Profit Margin
OP margin (%) = (Operating profit ÷ Revenue) × 100
The cleanest profitability indicator for comparing firms in the same industry.
10Net Profit Margin
Net margin (%) = (Net profit ÷ Revenue) × 100
Affected by capital structure (interest costs) and tax rate.
11Return on Capital Employed (ROCE)
ROCE (%) = (Operating profit ÷ Capital employed) × 100
Capital employed = total equity + non-current liabilities. Above 15% is healthy.
12Current Ratio
Current ratio = Current assets ÷ Current liabilities
Liquidity check. 1.5–2 is comfortable. Below 1 means short-term cash trouble.
13Acid Test (Quick Ratio)
Acid test = (Current assets − Inventory) ÷ Current liabilities
Stricter liquidity test. 1.0 is comfortable. Subtracts inventory because it cannot always be sold quickly.
Mark losses to avoid Forgetting × 100 to get a percentage · Using net assets instead of capital employed in ROCE
The Business School · Calculation Cheat Sheet
03 / 06

Section 3 · Break-even & Contribution

Four formulas plus one worked example using a real UK SME.

AQA: 3.5 Financial performance Edexcel: Theme 2.3 OCR: Unit 3
14Contribution per unit
Contribution per unit = Selling price − Variable cost per unit
How much each sale contributes to covering fixed costs.
15Break-even Output
Break-even (units) = Fixed costs ÷ Contribution per unit
Minimum units to sell before profit starts.
16Margin of Safety
Margin of safety (units) = Actual sales − Break-even sales
A buffer. Often expressed as % of actual sales.
17Target Profit Output
Target output = (Fixed costs + Target profit) ÷ Contribution per unit
How many units needed to hit a specific profit target.
Worked example 1 · Bristol coffee van
A street-food coffee van has fixed costs of £2,800/month. Coffees sell at £3.50 with variable cost of £0.90.
Contribution per coffee = £3.50 − £0.90 = £2.60
Break-even = £2,800 ÷ £2.60 = 1,077 coffees per month
If actual sales are 1,500 coffees, MoS = 1,500 − 1,077 = 423 coffees (28%)
If the van wants £1,500 profit: target = (£2,800 + £1,500) ÷ £2.60 = 1,654 coffees
Mark losses to avoid Mixing fixed costs and variable costs in the formula · Rounding break-even output downward (always round UP)
The Business School · Calculation Cheat Sheet
04 / 06

Section 4 · Cash Flow & Working Capital

Five formulas covering liquidity and short-term financial management.

AQA: 3.5 / 3.7 Edexcel: Theme 2.3 OCR: Unit 3
18Net Cash Flow
Net cash flow = Cash inflows − Cash outflows
Per period. Different from profit because timing matters.
19Closing Balance
Closing balance = Opening balance + Net cash flow
The cash you start the next period with.
20Working Capital
Working capital = Current assets − Current liabilities
Day-to-day operating cash. Positive working capital = healthy short-term operations.
21Receivables Days
Receivables days = (Receivables ÷ Revenue) × 365
How long customers take to pay. 30–60 days is typical UK B2B.
22Payables Days
Payables days = (Payables ÷ Cost of sales) × 365
How long the firm takes to pay suppliers. Higher = better short-term cash but supplier strain.

Section 5 · Investment Appraisal

23Payback Period
Payback = Investment ÷ Annual net cash flow
Years to recover the initial outlay. Short = lower risk.
24Average Rate of Return (ARR)
ARR (%) = (Average annual profit ÷ Investment) × 100
Compare against the cost of borrowing. ARR > borrowing rate = potentially viable.
25Net Present Value (concept)
NPV = Σ (Discounted cash flows) − Investment
Edexcel/AQA students given discount tables. Positive NPV = project adds value.
26Capital Employed
Capital employed = Total equity + Non-current liabilities
Used in ROCE. Represents long-term financing of the business.
The Business School · Calculation Cheat Sheet
05 / 06

Bonus · Worked Examples & Exam Technique

Real UK businesses applied to the calculations. The exam technique notes below are based on senior examiner reports.

Use this: homework, mock prep, revision Time per example: 10–15 minutes
Worked example 2 · Greggs plc — Gross profit margin
Greggs reports revenue of £1.8bn and gross profit of £612m in a recent financial year.
GP margin = (£612m ÷ £1,800m) × 100 = 34.0%
Industry benchmark: UK food retail typically runs 25–35% gross margin. Greggs sits at the high end because of vertical integration (they bake in-house).
Worked example 3 · JD Sports — Acid test
A simplified JD Sports balance sheet shows current assets £900m (including inventory £550m) and current liabilities £600m.
Current ratio = £900m ÷ £600m = 1.50 (comfortable)
Acid test = (£900m − £550m) ÷ £600m = 0.58 (low)
Note the gap: JD has a lot of stock. If sportswear demand crashed, the acid test reveals real liquidity risk.
Worked example 4 · Local cafe — Payback
A Manchester cafe owner spends £28,000 on a new oven. The oven is forecast to save £700/month in supplier costs.
Annual cash flow saving = £700 × 12 = £8,400
Payback period = £28,000 ÷ £8,400 = 3.33 years (3 years 4 months)
Decision rule: if the cafe's payback threshold is 3 years, this project is rejected on payback grounds — though ARR and NPV might still favour it.

Exam Technique — Calculation Questions

Made by Sakari Laajoki · TBS Education Ltd Oy (company number 3614159-3, Lahti, Finland). Free to share with colleagues. Modifications welcome for classroom use. Resale not permitted. Found a typo or want to suggest an improvement? thebusiness.school

The Business School · Calculation Cheat Sheet
06 / 06