Business Calculation Essentials

Understanding revenue is your starting point - it's simply the price of your product multiplied by how many you sell. Think of it as all the money flowing into a business before any costs are taken out.

Variable costs change depending on how much you produce, like materials for each product. You calculate this by multiplying the cost per unit by the total quantity produced. Total costs include both these variable costs plus fixed costs (like rent) that stay the same regardless of production.

Profit is what everyone really cares about - it's total revenue minus total costs. This tells you if the business is actually making money or losing it.

When businesses borrow money, interest on loans shows how much extra they'll pay back. Calculate this as: (total repayment - borrowed amount) ÷ borrowed amount × 100.

Key Tip: Always remember that profit = revenue - costs. If this number is negative, the business is losing money!

The break-even point tells you exactly how many units you need to sell to cover all costs. At break-even, you're not making profit, but you're not losing money either. The margin of safety shows how much sales can drop before you start losing money - it's actual sales minus break-even sales.