Formulas

Break-even point (BEP)

The level of sales at which total revenues equal total costs, resulting in neither profit nor loss. Formula: (BEP = \frac{Fixed Costs}{Selling Price per Unit - Variable Cost per Unit}).

Margin of Safety

The difference between actual sales and break-even sales, indicating how much sales can drop before the business reaches its break-even point. Formula: (Margin of Safety = Actual Sales - Break-even Sales).

Return on Investment (ROI)

A measure of the profitability of an investment. Formula: (ROI = \frac{Net Profit}{Cost of Investment} \times 100).

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets. Formula: (Current Ratio = \frac{Current Assets}{Current Liabilities}).