GCSE Business Formula Essentials

Costs and revenue form the backbone of any business calculation. Your total costs equal fixed costs plus variable costs, whilst revenue is simply sales multiplied by price. Remember that fixed costs stay the same regardless of how much you produce, but variable costs change with quantity.

Profit calculations come in two flavours. Gross profit (revenue minus cost of sales) shows profit before other expenses, whilst net profit (revenue minus total costs) reveals the real bottom line. These figures tell you whether a business is actually making money.

Profit margins express these profits as percentages of revenue. The gross profit margin and net profit margin formulas help you compare profitability across different businesses or time periods. Higher percentages mean better performance.

Quick Tip: Always multiply by 100 when calculating percentages - it's easy marks to lose if you forget!

Break-even analysis tells you exactly when a business stops losing money. Calculate contribution (sales price minus variable costs per unit) first, then divide fixed costs by contribution. The margin of safety shows how far above break-even point the business is operating.