FC Lesson 4

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

Evaluate responses using AI:

OFF

Answer explanation

Break even point

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

used in the product.

Evaluate responses using AI:

OFF

Answer explanation

Variable Cost (VC)

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

Evaluate responses using AI:

OFF

Answer explanation

Variable Cost (VC)

- difference between Selling price and Variable cost

Evaluate responses using AI:

OFF

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).

Evaluate responses using AI:

OFF

Answer explanation

Fixed Cost (FC)

is simply the contribution margin minus fixed costs

Evaluate responses using AI:

OFF

Answer explanation

Net income

is when net income equals zero.

Evaluate responses using AI:

OFF

Answer explanation

break-even point

Times interest earned

Formula:

Evaluate responses using AI:

OFF

Answer explanation

Operating profit/Interest

expense

this ratio measures a

company's ability to make periodic

interest payments on its debt

obligations

Evaluate responses using AI:

OFF

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.

Evaluate responses using AI:

OFF

Answer explanation

times interest

earned