Formulae Sheet 2
CAMBRIDGE O LEVEL COMMERCE (7100)
COMPLETE FORMULA SHEET + ANALYSIS
PART 2
| Topic | Formula / Calculation | Meaning | Examiner Analysis / Usage |
|---|---|---|---|
| Percentage Increase | % Increase = (Increase ÷ Original Value) × 100 | Measures growth | Common in trade and sales data |
| Percentage Decrease | % Decrease = (Decrease ÷ Original Value) × 100 | Measures reduction | Used in loss or declining sales |
| Percentage Profit | % Profit = (Profit ÷ Cost Price) × 100 | Profit earned as percentage | Used in business performance |
| Percentage Loss | % Loss = (Loss ÷ Cost Price) × 100 | Loss as percentage | Common examiner trap |
| Average Cost | Average Cost = Total Cost ÷ Quantity Produced | Cost per unit | Helps analyse efficiency |
| Cost per Unit | Cost per Unit = Total Cost ÷ Units | Production cost of one item | Lower cost improves competitiveness |
| Revenue per Unit | Revenue per Unit = Total Revenue ÷ Units Sold | Selling income per item | Helps compare products |
| Stock Turnover Rate | Stock Turnover = Cost of Goods Sold ÷ Average Stock | Speed stock is sold | Higher turnover usually better |
| Rate of Inventory Turnover | Inventory Turnover = Sales ÷ Average Inventory | Measures inventory efficiency | Important in retail questions |
| Mark-up | Mark-up = (Profit ÷ Cost Price) × 100 | Profit added onto cost | Common in retailer calculations |
| Margin | Margin = (Profit ÷ Selling Price) × 100 | Profit from selling price | Often confused with mark-up |
| Average Clause Insurance | Claim = (Insured Amount ÷ Actual Value) × Loss | Reduced payout if underinsured | Very important formula |
| Compound Interest | Amount = P(1 + R/100)^T | Interest on interest | Occasionally linked with banking |
| Simple Interest | SI = (P × R × T) ÷ 100 | Basic loan interest | Easier finance questions |
| Total Hire Purchase Cost | Total HP Cost = Deposit + All Instalments | Total paid through HP | Compare with cash price |
| Hire Purchase Interest | HP Interest = HP Price − Cash Price | Extra paid through instalments | Links with consumer credit |
| Customs Duty | Duty = Duty Rate × Value of Imports | Tax on imports | Used in trade protection questions |
| VAT / Sales Tax | Tax = Tax Rate × Selling Price | Government indirect tax | Common commerce-business link |
| Commission | Commission = Sales × Commission % | Payment to salespersons/agents | Often linked with motivation |
| Depreciation (Straight Line) | (Cost − Residual Value) ÷ Useful Life | Annual fall in asset value | Sometimes linked with business costs |
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.
MARK-UP VS MARGIN ANALYSIS
| Formula | Based On | Key Difference |
|---|---|---|
| Mark-up | Cost Price | Profit added to cost |
| Margin | Selling Price | Profit from final selling price |
STOCK TURNOVER ANALYSIS
| Situation | Commercial Meaning |
|---|---|
| High stock turnover | Goods sell quickly |
| Low stock turnover | Slow-moving inventory |
| Fast turnover | Lower storage costs |
| Slow turnover | Risk of obsolete stock |
TAXATION ANALYSIS TABLE
| Tax Situation | Commercial Effect |
|---|---|
| Higher VAT | Prices increase |
| Higher customs duty | Imports become expensive |
| Lower taxes | Consumer spending may rise |
| Import tariffs | Protect local industries |
CONSUMER CREDIT ANALYSIS TABLE
| Situation | Business Effect |
|---|---|
| Hire purchase available | Sales increase |
| Low interest rates | Borrowing rises |
| High interest rates | Consumer spending falls |
| Easy credit access | Demand increases |
INTERNATIONAL TRADE ANALYSIS
| Situation | Commercial Effect |
|---|---|
| Exports increase | Foreign exchange earnings rise |
| Imports increase | Greater product choice |
| Trade deficit | More imports than exports |
| Trade surplus | More exports than imports |
TRANSPORT COST ANALYSIS
| Situation | Business Effect |
|---|---|
| Lower transport costs | Lower product prices |
| Faster delivery | Improved customer satisfaction |
| Delayed transport | Risk of stock shortages |
| Expensive transport | Reduced competitiveness |
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.
BUSINESS PERFORMANCE ANALYSIS TABLE
| Business Situation | Commercial Impact |
|---|---|
| Revenue rises | Higher sales income |
| Costs fall | Higher profits |
| Productivity rises | Greater efficiency |
| Expenses rise | Lower profitability |
BANKING & FINANCE ANALYSIS
| Financial Situation | Commercial Effect |
|---|---|
| High interest rates | Borrowing decreases |
| Low interest rates | Borrowing increases |
| More savings | Banks have more funds to lend |
| More loans | Businesses expand operations |
INSURANCE ANALYSIS TABLE
| Insurance Situation | Commercial Effect |
|---|---|
| Adequate insurance | Better financial security |
| Underinsurance | Reduced compensation |
| High risk activities | Higher premiums |
| Low risk activities | Lower premiums |
E-COMMERCE ANALYSIS TABLE
| Situation | Commercial Effect |
|---|---|
| Online sales increase | Wider customer reach |
| Lower premises costs | Higher profit margins |
| Cybercrime increases | Consumer trust decreases |
| Faster communication | Better efficiency |
EXAMINER-STYLE QUICK LOGIC CHAINS
| Trigger | Commercial Chain |
|---|---|
| Lower costs | Lower prices → Higher demand → Higher sales |
| Better advertising | Greater awareness → More customers → Higher revenue |
| Faster transport | Quicker delivery → Better satisfaction → Repeat purchases |
| More finance | Business expansion → Higher output → Greater profits |
| Better communication | Faster decisions → Improved efficiency → Lower costs |
MOST IMPORTANT EXAM FORMULAS
TOP PRIORITY:
-
Trade Discount
-
Cash Discount
-
Exchange Rate
-
Balance of Trade
-
Insurance Claim
-
Profit
-
Hire Purchase Cost
-
Percentage Profit
-
VAT
-
Commission
FINAL EXAM TECHNIQUES
ALWAYS:
-
Show formula first
-
Include currency signs
-
Write full workings
-
Use calculator carefully
-
Check decimal placement
-
Read exchange rate direction twice
BIGGEST EXAM MISTAKES
| Mistake | Fix |
|---|---|
| Wrong exchange conversion | Identify which currency required |
| Missing units | Include $, £, Rs etc |
| Wrong percentage formula | Divide by ORIGINAL value |
| Ignoring trade discount order | Trade discount before cash discount |
| Forgetting insurance average clause | Use correct ratio |
FINAL GOLDEN RULE
COMMERCE CALCULATIONS ARE EASY MARKS IF:
-
Formula is memorised
-
Working is shown
-
Logic is understood
-
Units are included