Breakeven Analysis, also known as Cost-Volume-Profit (CVP) Analysis, is a managerial accounting technique in which costs are analyzed according to their fixed or variable nature and compared to sales revenue to determine the level of sales or production at which the business neither makes a profit nor incurs a loss.
A breakeven chart (or breakeven graph) is a visual tool used to depict the relationship between an organization's total costs—comprising fixed and variable costs—and its sales revenue across different levels of activity. The intersection point of these curves shows the breakeven point, where total costs equal total revenue.
Capital Turnover, also known as Asset Turnover, measures the efficiency of a company in using its assets to generate sales revenue. A higher ratio indicates better utilization of assets in generating sales.
Cash inflows are the cash receipts of a business, which include transactions such as sales of trading stock, receipts from debtors for credit sales, and disposals of fixed assets.
A key financial metric representing the direct costs to an organization of supplying goods or services, used to calculate gross profit by deducting this figure from sales revenue.
In standard costing and budgetary control, a favourable variance is any difference between the actual and budgeted performance of an organization where this creates an addition to the budgeted profit. For example, a favourable variance may occur if the actual sales revenue is greater than that budgeted or if actual costs are less than budgeted costs.
Gross profit, also known as gross margin or gross profit margin, is the difference between a company’s sales revenue and its cost of goods sold (COGS), excluding operating expenses such as finance, administration, and distribution costs.
Gross Revenue, also known as Gross Sales, refers to the total sales revenue of a company at invoice values, before any deductions for customer discounts, returns, allowances, or other adjustments.
Growth rate is a metric that illustrates the amount of change over a period in certain financial characteristics of a company, such as sales revenue or profits. It is usually expressed as a percentage and can be compared to the Retail Price Index or another inflation measure to evaluate the company's real performance.
Brief summaries of financial information often given some prominence in the annual accounts and report of a company. Highlights typically include key metrics such as sales revenue, profits, earnings per share, and dividends for the current and previous financial years.
Net Profit Percentage, also known as the Net Margin Ratio, is a critical financial metric that measures a company's profitability by expressing net profit as a percentage of sales revenue.
The Production-Volume Ratio (PV Ratio), also known as the Contribution Margin Ratio, is a performance metric that measures the proportion of sales revenue that exceeds variable costs. It's an essential indicator in assessing the profitability of products or services in cost-volume-profit analysis.
Profit margin measures the profitability of a single transaction or set of transactions by calculating the excess of sales revenue over the costs incurred in providing the goods or services sold. It is also a measure of the surplus of net assets over a period, taking into account capital injections or withdrawals by proprietors.
A sales budget is a financial plan that outlines projected sales volumes and revenues for a specific budget period. It serves as a critical component of the budgetary control system and aids in strategic planning and performance evaluation.
A budget that determines the expenditure the sales function is allowed to incur in achieving the sales volumes and sales revenue budgets during a budget period.
In standard costing, the sales margin price variance arises due to the difference between actual sales revenue and the budgeted or standard selling prices for the actual sales quantities achieved. This variance can be either adverse or favorable.
Sales revenue is the income generated from the sale of goods or services by a company. It is a key determinant of a company's financial health, and it is crucial for assessing growth potential and earning assessments.
Sales values represent the prices charged for items when they are sold. Additionally, in accounting, they serve as a method of apportioning joint costs between joint products in process costing models.
Turnover, also known as sales revenue, represents the total income generated by an organization from selling goods and services, excluding discounts and taxes, within a specified period.
The Variable Cost Ratio measures the ratio of variable costs to sales revenue, expressed as a percentage. It provides insight into the relationship between production costs and sales, crucial for cost management and pricing strategies.
