Basic Earnings Per Share (Basic EPS) is a financial metric used to measure a company's profitability on a per-share basis, without considering any dilutive effects from convertible securities or options.
Break-Even Analysis is a financial analysis that identifies the point at which expenses equal gross revenue, resulting in neither profit nor loss. It is a crucial tool for businesses to determine the minimum sales volume required to avoid losses.
A breakeven chart (or breakeven graph) is a visual tool used to depict the relationship between an organization's total costs—comprising fixed and variable costs—and its sales revenue across different levels of activity. The intersection point of these curves shows the breakeven point, where total costs equal total revenue.
An overarching term that encompasses various elements that affect the general climate of the economy and political situation, thereby influencing the profitability and prosperity of businesses.
A Capital Investment Budget outlines the funds allocated for significant investments in a company's long-term assets, such as property, plants, and equipment. These investments are typically intended to enhance a company's operational capacity, efficiency, and overall profitability.
The contribution margin ratio, also known as the contribution-to-sales ratio, production-volume ratio, or profit-volume ratio, is a financial metric that shows the relationship between a product’s contribution margin and its sales value. This ratio is essential for ranking products based on their relative profitability.
Cross-sectional analysis involves comparing the accounting ratios of one company with those of its peers to assess profitability, liquidity, and capital structure. This method helps in determining a company's performance relative to its competitors.
Customer Profitability Analysis (CPA) evaluates the profitability of each customer or segment to help businesses focus on value-adding customers and optimize resource allocation.
Downsizing is a strategic measure taken by organizations to reduce their workforce and operational size with the primary goal of boosting profitability, cost-efficiency, and flexibility.
The comprehensive appraisal of a business or its assets, evaluating its liabilities, profitability, cash flow, policies, and compliance, typically conducted prior to a major transaction or stock exchange flotation.
Earnings Before Taxes (EBT) measures a company's profitability, calculated as sales revenues minus cost of sales, operating expenses, and interest expenses, before taxes have been deducted.
Earnings Per Share (EPS) is a commonly used metric in financial analysis to measure the profitability of a company by dividing its net income by the number of outstanding shares of common stock.
Economic Value Added (EVA) is a financial performance measure that calculates the value created beyond the required return on the company's capital. It is an indicator of reflecting a company's ability to generate profit while taking into account the opportunity cost of capital employed.
The financial perspective focuses on how businesses can meet their goals in terms of profitability, growth, and shareholder value. It is one of the key facets of the Balanced Scorecard framework.
An in-depth analysis of financial statements to assess a business's performance and position, using ratios to evaluate profitability, solvency, working capital management, liquidity, and capital structure.
Gross margin represents the percentage of total sales revenue that a company retains after incurring the direct costs associated with producing the goods and services it sells. It is a critical metric for assessing a company's financial health and operational efficiency.
The gross margin ratio, also known as the gross profit percentage, is a financial metric that measures the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). It is a critical indicator of a company's financial health and its ability to manage production costs.
Gross Profit Margin is a financial metric used to assess a company's financial health and its efficiency in generating profit from revenue. It represents the percentage of revenue that exceeds the cost of goods sold (COGS).
A Hundred-Percent Location, also known as a One-Hundred-Percent Location, refers to a prime area in a city or a town that garners the highest market values and foot traffic. These locations are in high demand due to their strategic positioning, offering businesses substantial visibility and profitability prospects.
An interim dividend is a type of dividend paid to shareholders during a company's financial year, prior to the annual dividend payout. It serves as an indication of the company's current profitability and financial health.
The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of an investment by calculating the rate of return where the net present value (NPV) of cash flows equals zero.
Lifetime Value (LTV) is a metric used to forecast the future profitability a customer will bring to a business over the entire duration of their relationship with the company. It is pivotal in making strategic decisions related to marketing, customer acquisition, and retention.
A constraint in budgetary control and decision making that prevents an organization from achieving higher levels of performance and profitability.
Managed costs are specific expenses that a company can control or influence through internal decisions, strategic planning, and efficient resource management. Careful handling of managed costs can significantly impact a company's operational efficiency and overall profitability.
The margin of profit is a financial metric that reveals the relationship between gross profits and net sales. It is used to evaluate a company's profitability by expressing gross profit as a percentage of net sales.
Marginal Cost Pricing sets product prices based solely on the product's marginal costs. It is typically employed in exceptional situations where competition is intense.
The Marginal Efficiency of Capital (MEC) is the annual percentage yield earned by the last additional unit of capital. It is crucial for determining the profitability of investment projects. Also known as marginal productivity of capital, natural interest rate, net capital productivity, and rate of return over cost, MEC indicates which projects exceed the market rate of interest and are thus profitable to undertake.
A marginal producer in an industry is an individual producer who remains barely profitable at current levels of price and production.
Marginal property refers to real estate that is barely profitable to use. The concept often applies to land that can produce income, but only by the smallest of margins when comparing production costs to revenue.
Marginal revenue is the additional income that accrues to an organization as the result of selling an extra unit of sales. It is a critical metric for businesses in understanding the profitability impact of their incremental sales decisions.
Mix variances are a set of accounting metrics that assess the financial impact of differences between actual and standard input combinations used in production or sales. These measures help identify inefficiencies or deviations that may affect profitability.
Net earnings, also known as net income, represent the total profit of a company after all expenses and taxes have been deducted from total revenue. It is a crucial indicator of profitability.
The net margin ratio, also known as the net profit percentage, measures how much of each dollar of revenue earned by a company translates into actual profit after all expenses are deducted.
Net profit, also known as net margin or net profit margin, represents the amount of revenue that remains after all the expenses of an organization have been subtracted from its total sales. It is a crucial measure of a company's financial performance and profitability.
Net Profit Margin is a financial metric that indicates the percentage of profit a company makes for every dollar of revenue after accounting for all expenses, including taxes.
Normal profit is the minimum level of income needed for a business to remain competitive in an industry over the long term. It represents the point at which total revenue equals total cost, including explicit and implicit costs.
Operating performance ratios are financial analysis tools that measure a company's ability to generate profit from its operations during an accounting period. Higher ratios indicate greater profitability.
Pretax income, also known as earnings before tax (EBT), represents the amount of income earned from business or investments before the deduction of any applicable income taxes.
The Production-Volume Ratio (PV Ratio), also known as the Contribution Margin Ratio, is a performance metric that measures the proportion of sales revenue that exceeds variable costs. It's an essential indicator in assessing the profitability of products or services in cost-volume-profit analysis.
Profit margin is a measure of profitability that calculates how much of every dollar earned by a company winds up as profit. It is critical for assessing the efficiency and performance of a company.
Profitability and profitability ratios are essential metrics used to measure the efficiency and success of a business in generating earnings relative to various financial aspects like sales, assets, and equity.
RAROC, or Risk-Adjusted Return on Capital, is a financial metric used to determine profitability considering the risk taken by a firm. It assesses the returns, adjusted for risk, on the capital invested.
Rate of return pricing involves setting prices for a range of products so that they achieve a predetermined rate of return or return on capital employed (ROCE). This pricing strategy aligns pricing decisions with the financial objectives of earning a specific return, ensuring that the company meets its profitability targets.
Rationalization refers to reorganization efforts within a firm, group, or industry aimed at increasing efficiency and profitability. Activities under rationalization may include closing redundant units, expanding others, or restructuring the product range to adapt to market demands.
Relationship marketing is a strategy designed to foster long-term relationships with customers, suppliers, and distributors, aiming to enhance overall profitability and business success.
Residual income is the net income generated by a subsidiary or division after accounting for the costs associated with the capital it uses. This metric is particularly useful in determining the profitability and efficiency of investment projects within larger organizations.
Return on Assets (ROA) is an accounting ratio that measures the amount of profit generated during an accounting period as a percentage of the assets held by a company. It provides insights into how efficiently a company is utilizing its assets to produce profit.
Return on Capital Employed (ROCE) is an accounting ratio that measures an organization's profitability and efficiency in using its capital. It is expressed as a percentage of profit relative to the capital employed.
Return on Capital Employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed.
Return on Equity (ROE) is a measure of financial performance, determined by dividing net income by shareholders' equity. ROE is an essential metric for evaluating a company's profitability and efficiency in generating profits from its equity.
Return on Investment measures the profitability of an investment. It is a ratio that compares the gain or loss from an investment relative to its cost.
Return on Investment (ROI) measures the profitability of an investment, calculated as the net profit from an investment divided by the original cost of the investment, usually expressed as a percentage.
Sales mix represents the relative proportions of individual products that make up the total units sold within a company, offering insights into profitability and strategic planning.
Setback refers to both a specified distance from a curb or property line which restricts the erection of buildings, and to problems in business or manufacturing that lead to lower profits or delays in achieving targets.
The simple rate of return measures the profitability of an investment by dividing the total earnings (income and capital gains) by the original amount invested. It is a straightforward way to assess the financial performance of an investment without considering compounding effects.
A subscription-based business modeling technique that estimates the cost and impact on profitability of building a rate base over time using various sources of business.
In economics and business, submarginal entities are unable to maintain the minimum profit, production level, and so on to remain permanently in existence.
Trading Profit represents the profit of an organization before deductions for interest, directors' fees, auditors' remuneration, and other similar expenses. It is crucial for assessing the core operating efficiency of a business.
Unfavourable variance, also known as adverse variance, indicates that actual financial performance is worse than the budgeted expectation, resulting in lower profits or higher costs than anticipated.
Unit Standard Operating Profit represents the standard operating profit expressed as a rate per unit of production or sales, crucial for assessing profitability on a per-item basis.
The Variable Cost Ratio measures the ratio of variable costs to sales revenue, expressed as a percentage. It provides insight into the relationship between production costs and sales, crucial for cost management and pricing strategies.
