Unit 5
Revenue
Income from sales before costs are deducted
Formula for Sales revenue
Selling price per unit × units sold
Expenses
Indirect running costs
Formula for Total variable cost
Variable cost per unit × units sold
Liquidity
Ability to pay short-term debts using short-term assets
Equity
The owner’s claim after liabilities are subtracted from assets
Cost of Goods Sold
Direct cost of the goods sold
Liability
Debt or obligation owed
Asset
Resource controlled by the business
Budget variance
The difference between an actual figure and its budgeted figure
Formula for Margin of safety
Actual sales − break-even sales
Formula for Total cost
Total fixed cost + total variable cost
Formula for Contribution per unit
Selling price per unit − variable cost per unit
Formula for Profit or loss
Total revenue − total cost
Formula for Break-even output
Total fixed cost ÷ contribution per unit
Formula for Budget variance ($) and Budget variance (%)
Actual − budgeted
(Variance ÷ budgeted) × 100
Formula for Margin of safety (%)
(Margin of safety ÷ actual sales) × 100
Formula for Gross profit and Gross profit margin
Sales revenue − Cost of Goods Sold
(Gross profit ÷ sales revenue) × 100
Formula for Net profit and Net profit margin
Gross profit − expenses
(Net profit ÷ sales revenue) × 100
Formula for Net cash flow
Cash inflows − cash outflows
What is The Power of Compound Interest
Ability to earn interest on both your original principal and the accumulated interest from prior periods, creating exponential growth over time
What is the NO.1 rule for successful investment?
Don't lose money (Don't get scamed)
What happened in 2008 Financial Crisis?
Subprime Mortgage Crisis (Housing Bubble Burst)
What is the 2nd rule for successful investment?
Don't forget the 1st rule
Formula for Working capital and Current ratio
Current assets − current liabilities
Current assets ÷ current liabilities