FC Lesson 4

How many units should a company sell before it starts making money

Answer explanation

Break even point

- are costs such as labor to build or assemble the product and the materials

used in the product.

Answer explanation

Variable Cost (VC)

They are costs that increase or decrease in proportion to how many product units

Answer explanation

Variable Cost (VC)

- difference between Selling price and Variable cost

Answer explanation

Contribution Margin (CM)

- are those costs that stay the same regardless of how many products are sold

or made (within a reasonable range of sales or production).

Answer explanation

Fixed Cost (FC)

is simply the contribution margin minus fixed costs

Answer explanation

Net income

is when net income equals zero.

Answer explanation

break-even point

Times interest earned

Formula:

Answer explanation

Operating profit/Interest

expense

this ratio measures a

company's ability to make periodic

interest payments on its debt

obligations

Answer explanation

Times interest earned

A higher _ ratio suggests that a company

will be less likely to default on its loans.

This implies that the company is a safer

investment opportunity for debt

providers. Conversely, a low times

interest earned ratio means a company

has a higher chance of default.

Answer explanation

times interest

earned