Free interactive reference

IB Business Management SL Formula Sheet

A searchable IB Business Management SL formula sheet covering decision-making, break-even, ratio analysis, investment appraisal, forecasting, and capacity utilisation.

These formulas are rendered as real mathematics rather than images. Read the definition, check every variable, and follow the topic link to see the idea in context. Always confirm the permitted official booklet or sheet for your examination session.

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A · Decision-Making

Expected value (decision trees)

EV = \sum (\text{Probability} \times \text{Financial Outcome})

Sum the probability-weighted outcome of every branch from a decision node — used to compare choices under uncertainty.

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C · Costs, Revenue & Break-Even

Total cost, revenue & contribution

TC = FC + (VC \times Q) \qquad TR = P \times Q \qquad \text{Contribution/unit} = P - VC

Contribution per unit is what each unit sold contributes toward covering fixed costs, after its own variable cost.

$FC$: total fixed costs
$VC$: variable cost per unit
$Q$: quantity
$P$: selling price per unit

Break-even point

BEP = \frac{FC}{P - VC}

The output level at which total revenue equals total cost — zero profit, zero loss.

$FC$: total fixed costs
$P-VC$: contribution per unit

Margin of safety

\text{Margin of Safety} = \text{Actual (or Budgeted) Output} - BEP

How far current output is above the break-even point — a buffer against falling sales before losses begin.

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C · Profitability & Liquidity Ratios

Gross profit margin

GPM = \frac{\text{Gross Profit}}{\text{Sales Revenue}} \times 100

Gross profit as a % of revenue — reflects pricing and direct production cost control.

Net profit margin

NPM = \frac{\text{Net Profit}}{\text{Sales Revenue}} \times 100

Profit after ALL expenses, as a % of revenue — reflects overall operating efficiency.

Return on capital employed (ROCE)

ROCE = \frac{\text{Profit before Interest and Tax}}{\text{Capital Employed}} \times 100

How efficiently the business generates profit from the capital invested in it.

$\text{Capital Employed}$: non-current liabilities + equity

Current ratio

\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}

Tests whether a business can meet its short-term debts using its short-term assets. Usually written "x : 1".

Acid test (quick) ratio

\text{Acid Test Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}

A stricter liquidity test that excludes inventory, the current asset slowest to convert to cash.

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C · Investment Appraisal

Payback period

\text{Payback} = \text{Years to recover} + \frac{\text{Remaining amount to recover}}{\text{Net cash flow in the following year}}

How long an investment takes to repay its initial cost from net cash inflows. Ignores the time value of money and any returns after payback.

Average rate of return (ARR)

ARR = \frac{\text{Average Annual Profit}}{\text{Initial Investment}} \times 100

Average annual profit as a % of the initial cost — allows comparison against a target rate of return or other investments.

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D · Marketing

3-point moving average

MA_n = \frac{y_{n-1}+y_n+y_{n+1}}{3}

Smooths short-term/seasonal fluctuation out of a time series to reveal the underlying trend — centred on the middle period of each group.

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E · Operations

Capacity utilisation

\text{Capacity Utilisation} = \frac{\text{Actual Output}}{\text{Maximum Possible Output}} \times 100

How much of a business's maximum production capacity is actually being used — low utilisation means high average fixed costs per unit.

Reviewed by the Study to Learn editorial team · Updated 2026-07-24