Economics

Question 1

Break Even Point

Answer 1

of customers needed to breakeven in Year 1 = Fixed Costs in Year 1 / Contribution Margin per Customer in Year 1

Contribution Margin per Customer = Price - Variable Costs per Unit

Question 2

Payback Period (even cashflows)

Answer 2

Payback Period = Cost of the Investment / Annual net cash flow

Question 3

Payback Period (uneven cashflows)

Answer 3

Payback Period = Years of full recovery + (unrecovered cost at beginning of last year / cash flow first positive year)

Cumulative cash flows = Cost of investment - Yearly cash flows

Question 4

Return on Investment

Answer 4

ROI = (Gain from Investment - Cost of Investment) / Cost of Investment

Question 5

Debt Ratio

Answer 5

Debt Ratio = Total Debt / Total Assets

Question 6

Debt to Equity Ratio

Answer 6

Debt-to-Equity Ratio = Total Debt / Total Equity

Question 7

Gross Profit Margin

Answer 7

Gross Profit Margin = Gross Profit / Total Revenue

Question 8

EBITDA

Answer 8

Earnings Before Income, Tax, Depreciation, and Amortization

Question 9

Contribution Margin

Answer 9

CM = Price/Unit - Variable Cost/Unit