BU121 Lecture Notes - Lecture 7: Variable Cost
Document Summary
You need all the other factors to achieve financial performance. While accounting is the language of business, cash is the currency. If you do not have the cash to cover your bills, you can go bankrupt. Sales revenue accounts receivable (doesn"t mean you have it yet) Some new ventures show profitability during the startup stage, but . Need to know the level of sales (survival revenue) necessary to cover costs and break. It is more common for a new venture to have losses- survival stage even. And need to do this on a cash basis. Ebdat (earnings before depreciation/amortization and taxes) = 0. Ebdat = ebit + depreciation - interest. When ebdat = 0, revenues = expenses. Expenses can be variable (vc) or fixed (cfc) . Costs of directly providing a product or delivering a service therefore total $ amount varies with sales. For example cost of goods sold. But is constant as a % of sales revenue.
