ECON 1 Lecture Notes - Lecture 5: Cash Flow Statement, Cash Flow, Financial Statement
Document Summary
Money" generation cycle: need to find capital in form of cash, own cash, shareholder contributing share capital, bank borrowings. 1/ 2 are represented in balance sheet. By forecasting sales or turnover and costs needed to generate them (result is profit) Calculating the costs needed to set up business and then working back to a level of sales that you need to generate a target profit level. Incremental innovation forecasts need to be justified by demonstrating that. Targets are achievable, with operating and cost parameters of the business. Turnover = sales volume multiplied by unit price. Contribution per unit = difference between sales price and variable cost of each unit. Contribution margin = contribution per unit/ sales price (or total contribution/turnover) Total contribution = difference between turnover and your total variable costs. Margin of safety (%) = (turnover break-even)/ turnover. How much your turnover must drop before you arrive at your break-even point.
