Unit 5: Business Arithmetic

•  Unit of Sale, Unit Cost, Unit Price for multiple products or services
•  Break Even Analysis for multiple products or services
• Importance and use of cash flow projections
•  Budgeting and managing the finances
• Computation of working capital
•  Inventory control and EOQ
• Return on Investment (ROI) and Return on Equity (ROE)

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Break-even Point 

Breakeven point is the level of sales (or revenue generated) that equals all the expenses required for generating that revenue.

•  Revenue is not more than the expenses (i.e. no profit) nor is it less than the expenses (i.e. no loss).
• Total revenue = Total expenses
•   In other words there is neither loss nor profit.

Formulae  

                  Break-even Point = Fixed Cost / Gross Margin 

                        Gross Margin = Selling Price – Variable cost 

Note: 

Answer will be in units

Break-even Point in rupees = Break-even Point in units X Selling Price 

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Economic Order Quantity (EOQ)

Economic order quantity (EOQ) is the order quantity of inventory that minimizes the total cost of inventory management.

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Return on investment and return on equity

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questions for practice

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