Formula Sheet 1
CAMBRIDGE O LEVEL COMMERCE (7100)
COMPLETE FORMULA SHEET + ANALYSIS
PART 1
| Topic | Formula / Calculation | Meaning | Examiner Analysis / Usage |
|---|---|---|---|
| Trade Discount | Trade Discount = List Price × Discount % | Reduction given before sale | Usually asked in invoices and wholesaler questions |
| Net Price | Net Price = List Price − Trade Discount | Final amount after discount | Must show working stepwise |
| Cash Discount | Cash Discount = Amount Owed × Discount % | Reduction for early payment | Often linked with prompt payment |
| Final Payment | Final Payment = Amount Owed − Cash Discount | Amount customer finally pays | Common calculation in paper 2 |
| Gross Profit | Gross Profit = Revenue − Cost of Goods Sold | Profit from trading activity only | Shows trading performance |
| Net Profit | Net Profit = Gross Profit − Expenses | Final profit after all expenses | Used in profitability analysis |
| Revenue | Revenue = Selling Price × Quantity Sold | Total sales income | Can be linked with demand increase |
| Cost | Cost = Fixed Cost + Variable Cost | Total business expenses | Used in break-even style reasoning |
| Profit | Profit = Revenue − Cost | Financial gain | Most common commerce relationship |
| Loss | Loss = Cost − Revenue | Financial deficit | Mentioned when costs exceed sales |
| Exchange Rate Conversion | Foreign Currency = Local Currency ÷ Exchange Rate | Converts local to foreign currency | Common international trade question |
| Reverse Exchange Rate | Local Currency = Foreign Currency × Exchange Rate | Converts foreign to local | Students often reverse incorrectly |
| Balance of Trade | Balance of Trade = Exports − Imports | Difference between exports and imports | Positive = favourable |
| Favourable BOT | Exports > Imports | Country earns more from exports | Improves foreign exchange earnings |
| Unfavourable BOT | Imports > Exports | Country spends more abroad | May weaken economy |
| Insurance Premium | Premium = Rate % × Value Insured | Cost paid for insurance | Often linked with risk level |
| Insurance Claim (Average Clause) | Claim = (Insured Value ÷ Actual Value) × Loss | Compensation when underinsured | Extremely common tricky calculation |
| Underinsurance | Insured Value < Actual Value | Property insured below worth | Reduces compensation payout |
| Overinsurance | Insured Value > Actual Value | Property insured above worth | Cannot profit from insurance |
| Simple Interest | SI = (P × R × T) ÷ 100 | Interest on original amount only | Sometimes linked with loans |
| Amount After Interest | Amount = Principal + Interest | Total repayment | Used in finance questions |
Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.
INSURANCE ANALYTICAL FORMULAS
| Formula Situation | Commercial Interpretation |
|---|---|
| Higher premium | Usually caused by higher risk |
| Lower premium | Usually caused by lower risk |
| Underinsurance | Business receives reduced compensation |
| Adequate insurance | Improves business security |
| No insurance | Business faces major financial risk |
FOREIGN EXCHANGE ANALYSIS TABLE
| Currency Movement | Business Effect |
|---|---|
| Currency depreciates | Exports become cheaper |
| Currency depreciates | Imports become expensive |
| Currency appreciates | Imports become cheaper |
| Currency appreciates | Exports become expensive |
DISCOUNT ANALYSIS TABLE
| Type | Commercial Effect |
|---|---|
| Trade Discount | Encourages bulk purchases |
| Cash Discount | Encourages early payment |
| Large Discounts | Increase sales volume |
| Excessive Discounts | Reduce profit margin |
PROFIT ANALYSIS TABLE
| Situation | Effect |
|---|---|
| Revenue increases faster than costs | Profit rises |
| Costs increase faster than revenue | Profit falls |
| Lower costs | Higher profitability |
| Higher sales | Higher revenue |
BANKING CALCULATION ANALYSIS
| Banking Situation | Commercial Impact |
|---|---|
| Loans increase | Business expansion possible |
| Interest rates rise | Borrowing becomes expensive |
| Overdraft used | Solves short-term cash flow problems |
| Savings increase | More funds available for lending |
HIRE PURCHASE ANALYSIS
| Situation | Commercial Effect |
|---|---|
| Instalments spread payments | Consumers afford expensive goods |
| Interest charged | Consumers pay more overall |
| Hire purchase increases demand | Businesses increase sales |
| Missed instalments | Goods may be repossessed |
COMMON EXAMINER TRAPS
| Trap | Correct Approach |
|---|---|
| Forgetting units/currency | Always include currency sign |
| Reversing exchange rate | Read wording carefully |
| Ignoring working | Show every step |
| Wrong discount order | Trade discount first, then cash discount |
| Wrong BOT interpretation | Positive = favourable |
GOLDEN EXAM TECHNIQUE
ALWAYS:
-
Write formula first
-
Substitute values
-
Show calculations
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Box final answer