Quantitative skills in business study guide

The difference between two values expressed as a percentage of the original value.

The average, or mean, is the total of a set of figures divided by the number of figures. It represents a typical value for a data set.

Total income from sales of goods or services before any costs are deducted.

The ratio of gross profit to revenue, expressed as a percentage.

The average rate of return is the percentage of profit earned on an investment relative to the amount invested, calculated as (Net profit ÷ Initial investment) × 100.

A projection of the cash that a business expects to receive and spend over a future period, usually expressed in monetary terms.

A line graph displays data points connected by straight lines, useful for showing changes over time.

Gross profit margin is the ratio of gross profit to revenue, expressed as a percentage.

A cash flow forecast predicts the timing and amount of cash inflows and outflows over a future period, helping a business plan for liquidity needs.

Market research is the systematic collection, analysis and interpretation of data about a market, about a product or service to be offered for sale in that market, and about the consumers or customers for that product or service.

The proportion of total sales in a market that a particular firm achieves, expressed as a percentage.

Providing evidence or reasoning to support a decision.

Exam practice

• An online tutoring service had 1,200 customers in 2022 and 1,500 customers in 2023. What was the percentage increase in customers?
• A small manufacturer produced 500 units of product A in January and 650 units in February. Calculate the percentage increase in production.
• A small independent retailer sells 1200 items in January, 1500 in February, 900 in March and 1800 in April. What is the average number of items sold per month over these four months?
• A small manufacturer produced the following numbers of units in the first six months of the year: 200, 250, 300, 350, 400, 450. Calculate the average monthly production and state what this figure tells you about the company’s production trend.
• A small online retailer sells 200 units of a product at £15 each. The total variable cost per unit is £5 and fixed costs are £1,000. What is the profit?
• A small manufacturer produces 500 units of a product. The selling price per unit is £20. Variable cost per unit is £12 and fixed costs are £5,000. Calculate the profit.
• A company sells a product for £120 and the cost of goods sold is £80. What is the gross profit margin?
• A business has the following figures for the year: revenue £500,000; cost of goods sold £300,000; operating expenses £100,000; interest £5,000; tax £10,000. Calculate the gross profit margin and the net profit margin.
• A small online retailer bought a new computer system for £2,400. After one year, the system generated a net profit of £480. What is the average rate of return on this investment?
• A small manufacturer invested £15,000 in new machinery. After two years, the machinery produced a net profit of £9,000. Calculate the average rate of return and state whether the investment was profitable.
• A business expects total revenue of £200,000 and total costs of £150,000 for the next year. What is the net cash flow?
• Calculate the net cash flow for a small manufacturer that expects total revenue of £120,000 and total costs of £85,000 for the next year.
• A bar chart shows the quarterly sales (in thousands of units) of an online tutoring service: Q1 120, Q2 150, Q3 130, Q4 170. Which statement is correct?
• Explain how a line graph showing monthly operating costs can help a small manufacturer decide on production levels.
• A company has a gross profit margin of 40%. What does this indicate?
• A small manufacturer reports the following figures for the year: revenue £120,000; cost of goods sold £72,000; operating expenses £20,000; interest £2,000; tax £3,000. Calculate the gross profit margin and the net profit margin. Explain what each ratio tells you about the business.
• Which figure on a profit and loss statement represents the amount left after all costs have been deducted from revenue?
• A small manufacturer invested £12,000 in new machinery. Over the next three years it earned £3,000, £3,500 and £4,000 in profit from that investment. Calculate the average rate of return (in %).
• A local independent retailer has collected the following data from a recent survey: 200 customers were surveyed, 120 said they prefer brand X, 80 prefer brand Y. What is the retailer’s market share for brand X?
• Explain how a small manufacturer can use primary research to improve the design of a new product.
• A small manufacturer sells 1,200 units of its product in a market where the total sales are 6,000 units. Which statement best describes the manufacturer’s market share?
• An online service business recorded sales of £45,000 last year. The total market sales for the same period were £150,000. Calculate the business’s market share and explain what a 30% market share indicates about its position in the market.
• A bar chart shows the monthly sales (in units) of an online tutoring service over the last year. Which statement best describes the trend?
• A small manufacturer, XYZ Ltd, has projected that demand for its product will rise from 10,000 units in 2023 to 12,000 units in 2024. The cost structure is: fixed cost £50,000, variable cost £20 per unit. The selling price is £35 per unit. Evaluate whether increasing production to meet the projected demand is justified.