BU121 Study Guide - Midterm Guide: Variable Cost, Contribution Margin
Document Summary
Cash budgeting: what is cash budgeting, deficiency - not enough cash, excess > minimum, excess < minimum, what is the end balance in each scenario. Cash build vs. burn rate: how quickly a venture builds cash through collections on sales, how quickly venture burns through/uses cash. Monthly net cash burn = (total gross build - total gross burn)/ # months. Liquidity: ability for venture to maintain high build rate. Breakeven: breakeven is the needed number of units sold or total amount of sales that"ll enable you to cover exactly your variable costs and fixed costs, aka survival revenue, at breakeven, profit = 0. Contribution: amount of earnings remaining after variable costs have been subtracted from revenue, contribution = selling price - variable cost, amount available to pay for fixed costs, excess contribution left after paying fixed costs = profit earned. Contribution margin: when a contribution is calculated as a percentage, cm = 1 - (vc/price)
