In the profit calculation diagram, 'Contribution' is derived by subtracting:
Explanation
Contribution margin is the portion of sales revenue that contributes to covering fixed costs.
Other questions
In the FinTree Company and Industry Analysis Framework, which component serves as the foundational layer?
Which section of an Initial Company Research Report typically contains the analyst's target price and investment recommendation?
In the context of determining a business model, which of the following is considered a component of the model?
Which characteristic is most indicative of a company with strong pricing power?
In a top-down revenue analysis, what is typically the first step?
Costs linked to long-term tangible or intangible assets are classified as:
Which equation correctly represents Operating Profit (EBIT)?
High fixed costs combined with a positive contribution margin typically result in:
The Degree of Operating Leverage (DOL) measures the sensitivity of:
A company has Sales of 1000, Variable Costs of 400, and Fixed Costs of 200. What is the Degree of Operating Leverage (DOL)?
Cost of sales (COGS) is classified as which type of cost?
Economies of Scale are best described as:
What does a negative Net Working Capital typically indicate?
Which of the following is considered a 'Use of Capital'?
The Degree of Financial Leverage (DFL) is calculated as:
If a company has a DOL of 1.5 and a DFL of 2.0, what is its Degree of Combined Leverage (DCL)?
Which cost is described as 'mainly variable' in the text?
What is the primary function of the Cash Conversion Cycle (CCC)?
In the leverage example provided, if Sales increase by 30%, and the Degree of Combined Leverage (DCL) is calculated, which metric increases by 30% × DCL?
If a company has EBIT of 400 and Interest expense of 200, what is the Degree of Financial Leverage (DFL)?
Which of the following is considered a 'Source of Capital'?
When analyzing 'Product Differentiation' in market types, what is a key implication for the company?
What is the relationship between 'Operating Profit' and 'Contribution Margin'?
In the 'Financial Analysis' section of an Initial Company Research Report, what is typically evaluated?
If a firm has a DOL of 2.5, what does this imply about its cost structure?
Which source of information for determining a business model is described as 'Proprietary'?
A 'Hot Issue' in the context of IPOs (from previous chapters, but ensuring we stick to Ch 5 context here - wait, check content). Actually, this term is not in Ch 5 text. Sticking strictly to Ch 5. Regarding forecasting horizons: 'Align with strategy, industry cycles, and...'
What is the formula for the 'Net Working Capital to Sales' ratio?
If a company increases its fixed costs while reducing variable costs, how does this affect the Degree of Operating Leverage (DOL)?
In the leverage diagrams, what comes immediately after 'EBT' in the profit flow?
Which of the following best describes 'Economies of Scope'?
A 'Use of Capital' involving the reduction of liabilities is:
Calculate the Degree of Financial Leverage (DFL) if Operating Profit is 500, Interest is 100, and Tax Rate is 30%.
Sales Channels are analyzed as part of which process?
Which statement about fixed costs is true?
What is the result of 'Contribution Margin' minus 'Fixed Costs'?
If a company reports 'Cost of Sales', 'SG&A', and 'R&D', what type of cost classification is it using?
What does the 'Price-taker' status imply about a firm's returns?
In the context of Top-Down Revenue Analysis, what is the final step listed?
If a company has a DOL of 2.0 and sales increase by 10%, by what percentage will Operating Profit (EBIT) increase?
Which factor is most likely to reduce the threat of substitutes for a company's product?
Consider a company with Sales=1000, VC=600, FC=200, Interest=100. Calculate the Degree of Combined Leverage (DCL).
What does 'Analyst Focus' refer to in the context of Determining the Business Model?
Which component is part of the 'Environmental' analysis in PESTLE (referenced in Industry Analysis framework)?
If a company has 'Cash and investments on hand', this is classified as:
Which of the following is a 'Public' source of information?
What does a DFL of 1.0 imply?
Which financial metric represents the 'bottom line' in the leverage diagram?
Rising profitability is cited as a signal of: