Break-Even Analysis is a financial analysis that identifies the point at which expenses equal gross revenue, resulting in neither profit nor loss. It is a crucial tool for businesses to determine the minimum sales volume required to avoid losses.
A constraint is a circumstance that prevents an organization from achieving higher levels of performance. Constraints typically result from limiting factors such as a shortage of skilled labor, materials, production capacity, or sales volume, and must be eliminated or reduced to improve performance. Constraints are also integral in linear programming problem statements.
One-hundred-percent location refers to the optimal location for a retail establishment within a local market area, where the business would achieve maximum sales volume compared to other possible locations.
A Percentage Lease is a lease agreement where the rental payment is based on a percentage of the tenant's sales volume made at the leased property, often with a stipulated minimum rent. This type of lease is frequently used by retailers.
Percentage Rent is a component of a rental agreement, specifically under a percentage lease, where rent is partially determined by the income or sales generated by the tenant's business operating within the leased property.
A metric used to measure the relationship between profit and sales volume, commonly referred to as the Contribution Margin Ratio, which indicates how much revenue from sales contributes to covering the fixed costs and generating profit.
Sales volume refers to the number of units sold of each product. It is a key metric in evaluating the performance of a company’s products and its overall market position.
A trade allowance is a producer discount given to distributors or retailers as a promotional effort to encourage sales. Retailers pass along the discount to the consumer, which promotes higher sales volumes. Though it can reduce producer profits, this practice is widely followed in many industries.
Variable costs, or variable expenses, are business costs that fluctuate in direct proportion to changes in production or sales volume. They contrast with fixed costs, which remain constant regardless of production levels.
