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2.4 Making Financial Decisions
2.4.1 Business Calculations
The concept and calculation of:
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Cards (103)
What is the purpose of business calculations?
Analyze financial performance
What is profit calculated as?
Revenue minus costs
Subtraction is used to calculate profit by subtracting
costs
from revenue.
True
To calculate a percentage, you divide the part by the
whole
and multiply by 100.
True
How is profit calculated in business calculations?
Revenue minus costs
What is the formula for the current ratio?
Current assets / Current liabilities
Steps to calculate revenue
1️⃣ Determine the sales volume
2️⃣ Determine the price per unit
3️⃣ Multiply sales volume by price per unit
Mathematical operations such as addition, subtraction, multiplication, and
division
are fundamental for business calculations
True
What do ratios compare in business calculations?
Two quantities
The formula for calculating total cost is Cost = Fixed Costs + Variable
Costs
What does "Price per Unit" represent in the revenue formula?
Amount charged per product
What type of costs vary with production volume?
Variable costs
What are fixed costs examples for a business?
Rent and insurance
Profit represents the money a business earns after covering its costs.
True
Ratios
are used in financial analysis to compare two quantities.
True
What is the formula for calculating revenue?
Sales Volume × Price per Unit
What is the formula for calculating total revenue?
Sales Volume × Price per Unit
What is the formula for calculating total cost?
Fixed Costs + Variable Costs
What does break-even analysis help businesses determine?
No profit or loss
What is the break-even point in units formula?
Fixed Costs
Price per Unit
−
Variable Costs per Unit
\frac{\text{Fixed Costs}}{\text{Price per Unit} - \text{Variable Costs per Unit}}
Price per Unit
−
Variable Costs per Unit
Fixed Costs
What is the formula for the break-even point in units?
\frac{\text{Fixed Costs}}{\text{Price per Unit} - \text{Variable Costs per Unit}}</latex>
What is the contribution margin ratio if the price per unit is $50 and variable costs per unit are $30?
0.4
Sales volume refers to the number of units or services sold.
True
A current ratio is calculated by dividing current assets by current
liabilities
What does the term "revenue" refer to in business terms?
Total money from sales
What does "Sales Volume" refer to in the revenue formula?
Number of units sold
Match the component with its value in the example:
Sales Volume ↔️ 500 units
Price per Unit ↔️
10
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10 < item2_{e}nd > < pair_{e}nd > < pair_{s}tart > < item1_{s}tart > Total Revenue < item1_{e}nd > < item2_{s}tart >
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5,000
Variable costs fluctuate with the
production volume
.
True
Profit represents the money earned after covering all
costs
.
True
If a business has revenue of $150,000 and costs of $100,000, the profit is
$50,000
.
True
Match the break-even component with its value:
Fixed Costs ↔️
50
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50,000 < item2_{e}nd > < pair_{e}nd > < pair_{s}tart > < item1_{s}tart > Price per Unit < item1_{e}nd > < item2_{s}tart >
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50
Variable Costs per Unit ↔️ $30
The formula to calculate the break-even revenue is:
\frac{\text{Fixed Costs}}{\text{Contribution Margin Ratio}}
In break-even analysis, the business makes neither profit nor
loss
.
True
Which key factors affect sales revenue forecasts?
Market trends, seasonal fluctuations
Break-even analysis is essential for understanding a company's
financial
performance.
True
Costs are the expenses a
business
incurs to produce and sell its products or services.
True
Addition is used in business calculations to calculate total revenue or
costs
Percentages represent a proportion out of
100
Ratios are expressed as a
fraction
Percentages are used to represent proportions out of
100
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