B
Break-Even Point
BEP
The point at which total cost and total revenue are equal, meaning your business makes neither a profit nor a loss. Knowing this figure helps you determine the minimum sales volume or revenue needed to cover all operating costs.
Break-Even Point (Units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
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Business Valuation
The process of determining the economic value of a whole business or company unit. Valuation is essential for securing investment, selling a company, or planning partnership buyouts. Common methods include asset-based, earnings multiplier, and discounted cash flow approaches.
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C
Cash Flow
The net amount of cash and cash-equivalents being transferred into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing, enabling it to settle debts, reinvest in its business, and return money to shareholders.
Net Cash Flow = Cash Inflows - Cash Outflows
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Cost of Goods Sold
COGS
The direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses, such as distribution costs and sales force costs.
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E
Employee Cost
The total cost to employ a staff member, which goes far beyond their basic gross salary. It includes mandatory payroll taxes, health insurance benefits, pension contributions, office space, equipment, and other overhead expenditures.
True Employee Cost = Gross Salary + Payroll Taxes + Benefits + Equipment & Overhead Costs
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F
Fixed Costs
Business expenses that remain constant regardless of the volume of goods or services produced. Examples include rent, administrative salaries, insurance, and equipment leases.
Use in Break-Even Calculator →
Freelance Rate
The pricing structure set by a freelance professional to charge clients. This is typically set as an hourly rate, a daily rate, or a fixed project-based fee. It must account for non-billable hours, taxes, software tools, and self-employed benefits.
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G
Gross Profit Margin
The percentage of revenue that exceeds the direct cost of goods sold (COGS). It measures how efficiently a company produces and sells its core goods or services.
Gross Profit Margin = ((Revenue - COGS) / Revenue) * 100
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M
Markup
The percentage added to the cost price of a product to determine its selling price. While margin is calculated based on revenue, markup is calculated based on the cost of the item.
Markup Percentage = ((Selling Price - Cost) / Cost) * 100
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N
Net Profit Margin
The percentage of revenue left over after all operating expenses, taxes, interest, and costs have been paid. This is the ultimate indicator of a business's bottom-line profitability.
Net Profit Margin = (Net Income / Total Revenue) * 100
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O
Operating Expenses
OPEX
The ongoing costs required to run a business day-to-day, excluding the direct costs of producing goods or services. This includes rent, utility bills, software subscriptions, insurance, and marketing costs.
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P
Product Pricing
The strategic process of setting a dollar value on retail or wholesale products. It must cover the cost of goods sold, support operating overheads, match competitor trends, and generate a target profit margin.
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R
Return on Investment
ROI
A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.
ROI = ((Net Benefit of Investment - Cost of Investment) / Cost of Investment) * 100
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S
Self-Employment Tax
A tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.
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T
Take-Home Pay
The net amount of income an employee receives after all taxes, benefits, pension contributions, and other voluntary or mandatory deductions have been taken out of their gross salary.
Take-Home Pay = Gross Income - Taxes - Health Benefits - Pension Contributions
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V
Variable Costs
Expenses that vary in direct proportion to business activity or production volume. Examples include raw materials, packaging, shipping rates, and transaction fees.
Use Variable Costs in BEP Calc →
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