IB Business and Management – Tests and Examinations
Formula Sheets for Examinations
IB Business Management: www.BusinessManagementIB.com
FORMULAE TO BE USED IN IB BUSINESS AND MANAGEMENT EXAMINATIONS
The following formulae will be used in the IB Business and Management external assessment. A copy
of the formulae will be provided for students in the examination. A copy should be provided for
students in mock examinations and tests, where applicable.
FOMULAE FOR RATIO ANALYSIS
PROFITABILITY RATIOS
𝐆𝐫𝐨𝐬𝐬 𝐩𝐫𝐨𝐟𝐢𝐭 𝐦𝐚𝐫𝐠𝐢𝐧 =
𝐍𝐞𝐭 𝐩𝐫𝐨𝐟𝐢𝐭 𝐦𝐚𝐫𝐠𝐢𝐧 =
Gross profit
x 100
Sales revenue
Net profit
x 100
Sales revenue
LIQUIDITY RATIOS
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐫𝐚𝐭𝐢𝐨 =
Current assets
Current liabilities
𝐀𝐜𝐢𝐝 𝐭𝐞𝐬𝐭 (𝐪𝐮𝐢𝐜𝐤) 𝐫𝐚𝐭𝐢𝐨 =
Current assets − stock
Current liabilities
SHAREHOLDER (STOCKHOLDER) RATIOS
𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞 =
Net profit before interest and tax
Number of ordinary shares
HL
IB Business and Management – Tests and Examinations
Formula Sheets for Examinations
𝐃𝐢𝐯𝐢𝐝𝐞𝐧𝐝 𝐲𝐢𝐞𝐥𝐝 =
Dividends per share
x 100
Market price
HL
EFFICIIENCY RATIOS
𝐑𝐞𝐭𝐮𝐫𝐧 𝐨𝐧 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐝 (𝐑𝐎𝐂𝐄) =
Net profit before interest and tax
x 100
Total 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐝 †
† Capital employed = shareholders’ funds + reserves + long-term liabilities
𝐒𝐭𝐨𝐜𝐤 𝐭𝐮𝐫𝐧𝐨𝐯𝐞𝐫 =
Cost of goods sold
Average stock
or
𝐒𝐭𝐨𝐜𝐤 𝐭𝐮𝐫𝐧𝐨𝐯𝐞𝐫 (number of days) =
Average stock
x 365
Cost of goods sold
𝐃𝐞𝐛𝐭𝐨𝐫 𝐝𝐚𝐲𝐬 𝐫𝐚𝐭𝐢𝐨 (number of days) =
Debtors
𝑥 365
Total sales revenue
𝐂𝐫𝐞𝐝𝐢𝐭𝐨𝐫 𝐝𝐚𝐲𝐬 𝐫𝐚𝐭𝐢𝐨 (number of days) =
Creditors
x 365
Total credit purchases
GEARING RATIO
𝐆𝐞𝐚𝐫𝐢𝐧𝐠 𝐫𝐚𝐭𝐢𝐨 =
Loan capital
x 100
Total capital employed
OTHER FORMULAE
INVESTMENT APPRAISAL
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐫𝐚𝐭𝐞 𝐨𝐟 𝐫𝐞𝐭𝐮𝐫𝐧 =
HL
Net return (profit)per annum
x 100
Capital outlay (cost)
𝐍𝐞𝐭 𝐩𝐫𝐞𝐬𝐞𝐧𝐭 𝐯𝐚𝐥𝐮𝐞 = Present value of return − original cost
HL
HL
IB Business and Management – Tests and Examinations
Formula Sheets for Examinations
ELASTICITY
𝐏𝐫𝐢𝐜𝐞 𝐞𝐥𝐚𝐬𝐭𝐢𝐜𝐢𝐭𝐲 𝐨𝐟 𝐝𝐞𝐦𝐚𝐧𝐝 =
% change in quantity demanded
% change in price
𝐂𝐫𝐨𝐬𝐬 𝐞𝐥𝐚𝐬𝐭𝐢𝐜𝐢𝐭𝐲 𝐨𝐟 𝐝𝐞𝐦𝐚𝐧𝐝 =
% change in quantity demanded of good A
% change in price of good B
𝐈𝐧𝐜𝐨𝐦𝐞 𝐞𝐥𝐚𝐬𝐭𝐢𝐜𝐢𝐭𝐲 𝐨𝐟 𝐝𝐞𝐦𝐚𝐧𝐝 =
% change in quantity demanded
% change in income
𝐀𝐝𝐯𝐞𝐫𝐭𝐢𝐬𝐢𝐧𝐠 𝐞𝐥𝐚𝐬𝐭𝐢𝐜𝐢𝐭𝐲 𝐨𝐟 𝐝𝐞𝐦𝐚𝐧𝐝 =
HL
HL
HL
% change in quantity demanded
% change in advertising expenditure
HL