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Title: Business Financial Accounting
Description: Basics of Business Financial Accounting providing information that helps determine product pricing based upon Cost and desired Profit Margin. And gives knowledge as to the number of sales takes to pay back startup costs, become self-sustaining, and profitable. Example provided to further explain and show concepts applied.
Description: Basics of Business Financial Accounting providing information that helps determine product pricing based upon Cost and desired Profit Margin. And gives knowledge as to the number of sales takes to pay back startup costs, become self-sustaining, and profitable. Example provided to further explain and show concepts applied.
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Business Financial Accounting
KEY: Revenue = Rev
...
- Cost
>Sales Rev
...
) + (Cost/Sales Rev
...
& Cost Margin = Cost/Sales Rev
...
Cost Margin(indirectly determines number of sales takes to become profitable & directly tells number of
sales need to pay back startup costs and become self-sustaining) = Cost/Sales Rev
...
) the More Profitable the business
>The Higher the (Cost/Sales Rev
...
margin goes down
>Break-even or Markup%(in respect to cost) Margin = Profit/Cost
>Determines when(after how many sales) business pays back startup costs and becomes selfsustaining
>The above information helps one determine product pricing based upon Cost and desired Profit
Margin
...
Example(Use of Concepts):
Given: Product Cost = $100 & Profit Margin = 16
...
& Cost Margin = Cost/Sales Rev
...
) + (Cost/Sales Rev
...
33%
83
...
If look at Profit Margin, it in Fractional form(simplified) = 1/6, therefore based on Profit Margin 6 sales
are needed to become Profitable
...
33% & Cost = $100, 83
...
, therefore
Sales Rev
...
Profit = Sales Rev
...
66% Results Based on Given: Cost Margin =
83
...
= $120, Profit = $20, Based on the Cost Margin and Markup Margin 5 sales are
needed to pay back startup costs and become self-sustaining, Based on Profit Margin 6 sales are needed
to become Profitable, therefore after 6 sales the Total Profit is $20
...
Business Financial Accounting Example(Walk Through)
Sales Rev
...
100
20
120
Cost
Profit
Sales Rev
...
100
20
120
Cost
Profit
Sales Rev
...
Cost
20
120
100
Profit
20
Sale #
$100 to cover Cost of Sale 2, $20 left: to go toward
paying Startup Cost
Startup Cost = $100
1
$100 to cover Cost of Sale 3, $20 left: to go toward
paying Startup Cost
2
$100 to cover Cost of Sale 4, $20 left: to go toward
paying Startup Cost
3
$100 to cover Cost of Sale 5, $20 left: to go toward
paying Startup Cost
4
$100 to cover Cost of Sale 6, $20 left: to go toward
paying Startup Cost
After 5 sales Startup Cost payed off: $20 * 5 = $100 &
business Self-Sustaining
$100 to cover Cost of Sale 7, $20 left: Profit
After 6 sales have Startup Costs payed off and Made
Total Profit of $20
5
6
Title: Business Financial Accounting
Description: Basics of Business Financial Accounting providing information that helps determine product pricing based upon Cost and desired Profit Margin. And gives knowledge as to the number of sales takes to pay back startup costs, become self-sustaining, and profitable. Example provided to further explain and show concepts applied.
Description: Basics of Business Financial Accounting providing information that helps determine product pricing based upon Cost and desired Profit Margin. And gives knowledge as to the number of sales takes to pay back startup costs, become self-sustaining, and profitable. Example provided to further explain and show concepts applied.