Equation meanings Flashcards
Definitions of equational terms
Market share
Market share is the percentage of total sales in a market that is owned by a particular business or product.
Total Contribution
Total contribution is the difference in total sales and total variable costs.
Price elasticity of demand
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price.
Breakeven
Breakeven is the point at which total revenue equals total costs.
Income elasticity of demand
Income elasticity of demand measures the responsiveness of quantity demanded to a change in income.
Contribution
Contribution is the percentage of total sales in a market that is owned by a particular business or product.
Margin of safety
Margin of safety is the difference between actual sales and the break-even level of sales.
Gross profit
Gross profit is the difference between sales revenue and the cost of goods sold.
Sales volume
Sales volume refers to the number of units of a product sold within a specific period.
Gross profit margin
Gross profit margin is a financial figure showing the percentage of sales revenue that exceeds the cost of goods sold.
Total variable costs
Total variable costs are the aggregate of all costs that vary directly with levels of output.
Sales revenue
Sales revenue is the total income generated from selling goods or services.
Total costs
Total costs are the sum of all costs incurred in the production of goods or services.
Variable costs
Variable costs are expenses that change in direct proportion to the level of output. Increase or decrease as the quantity of goods or services produced changes.
Profit
Profit is the financial gain obtained when total revenue exceeds total costs.
Net profit
Net profit is the amount remaining after all expenses, including operating costs, interest, and taxes have been deducted from total revenue.
Current Ratio
The current ratio is a metric that measures a company’s ability to cover its short-term liabilities with its short-term assets. A ratio above 1 indicates the company has more assets than liabilities.
Net profit margin
Net profit margin is a financial ratio that shows the percentage of revenue that remains as profit after all expenses, including taxes and interest have been deducted.
How efficient a company is turning revenue into profit.
Operating profit
Operating profit is the profit a company makes from its core business operations.
Reflects the efficiency of the company’s core business activities in generating profit.
Acid test ratio
The acid test ratio measures a company’s ability to cover short-term liabilities with its most liquid assets.
A ratio above 1 suggests the company can meet short-term obligations without relying on the sale of inventory.
Productivity
How effectivly resources, such as labor or capital are utilised to generate goods or services.
Labour = human assets (employees)
Capital = financial and physical (machine) assets
Operating profit margin
The operating profit margin is a ratio that indicates how efficiently a company is managing its core operations to generate profit.
Working capital
Working capital is a measure of a company’s short-term financial health and operational efficiency.
Labour productivity
Labour productivity measures the output per worker within a given time period.
Net cash flow
Net cash flow shows the amount of net cash generated or lost by a business over a period of time.
Variance
The difference between the expected and actual figure in financial terms.
Capital productivity
Capital productivity measures the efficiency with which a business uses its capital to generate output.
Capacity utilisation
Capacity utilisation measures the extent to which a business is using its production capacity.
Capital
The financial assets or resources that a business uses to fund its operations and growth.
