Understanding fixed, variable costs and contribution for profitability

Mastering Your Expenses: Fixed vs. Variable Do you know which of your expenses change with your sales volume? Fixed expenses (like rent) stay consistent, while variable expenses (like materials) fluctuate. Understanding this distinction helps you forecast costs, set pricing, and identify areas for cost reduction as your business grows! #ExpenseManagement #BusinessCosts #FinancialPlanning #SmallBusinessFinance #CostAnalysis #TriCountyBookkeeping

Drop in operating profit, driven by higher administrative expenses and lower sales, eclipsed a significant reduction in finance costs Read: https://lnkd.in/eFa_phnB

Start With Gross Margin Gross margin is more than a number-it is your pricing power, cost control and profit driver. We explain what it is, how to calculate it and the difference it makes. Learn more: https://lnkd.in/et8XNmwZ #GrossMargin #Profitability #PricingStrategy

Leverage is a concept in finance representing the use of fixed costs to magnify the changes in sales on a company's profit. 1.Operating leverage:- It measures the sensitivity of a company's EBIT. 2. Financial leverage:-It measures the sensitivity of a company's EPS to a change in EBIT. 3.Combined leverage:-It measures the sensitivity of EPS to changes in sales revenue. It measures the total effect of both operating and financial leverage on a company's EPS. #CorporateFinance #FinancialAnalysis #Leverage #FinancialLeverage #BusinessStrategy #FinanceTips #RiskManagement #EBIT

💰 Cost Cutting Strategy #1: Master Margin Pricing Here's a mistake costing you thousands: Using markup instead of margin pricing. ❌ Wrong: $100 cost × 1.35 = $135 (26% actual margin) ✅ Right: $100 cost ÷ 0.65 = $154 (35% true margin) That $19 difference per item adds up fast. On 100 units monthly, that's $22,800 more profit annually! Most business owners get this wrong and wonder why their margins are shrinking. What's your current pricing method? Comment "Ready" and we can discuss your pricing strategy to make sure you are on the track to profits and success! #Profits1st #Profit #PricingStrategy #BusinessTips #ProfitOptimization

𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝘁𝗵𝗲 𝗕𝗮𝘀𝗶𝗰 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲 𝗕𝗲𝘁𝘄𝗲𝗲𝗻 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗖𝘆𝗰𝗹𝗲 𝗮𝗻𝗱 𝗪𝗼𝗿𝗸𝗶𝗻𝗴 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗖𝘆𝗰𝗹𝗲 Firstly, let us understand the basic definitions of an operating cycle and a working capital cycle (WC) cycle. 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗖𝘆𝗰𝗹𝗲 - Measures the time it takes for a business to convert its raw materials (or inventory) to cash. 𝗪𝗖 𝗖𝘆𝗰𝗹𝗲 - Measures the time it takes for a business to convert its inventory and other resources (other current assets) to cash reduced by trade payables. WC cycle also includes advances and other current assets, unlike an operating cycle. 𝗙𝗼𝗿𝗺𝘂𝗹𝗮: 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗖𝘆𝗰𝗹𝗲 = Inventory Days + Trade Receivable Days 𝗪𝗖 𝗖𝘆𝗰𝗹𝗲 = Inventory days + Trade Receivable Days + Other CA (in days, if any) - Trade Payable Days. From the above definition we can see that a WC cycle is an extended version of the operating cycle considering a holistic view of cash flow incorporating the time it takes to pay off the suppliers. A shorter WC cycle indicates efficient cash flow management of a business.

𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝘁𝗵𝗲 𝗕𝗮𝘀𝗶𝗰 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲 𝗕𝗲𝘁𝘄𝗲𝗲𝗻 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗖𝘆𝗰𝗹𝗲 𝗮𝗻𝗱 𝗪𝗼𝗿𝗸𝗶𝗻𝗴 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗖𝘆𝗰𝗹𝗲 Firstly, let us understand the basic definitions of an operating cycle and a working capital cycle (WC) cycle. 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗖𝘆𝗰𝗹𝗲 - Measures the time it takes for a business to convert its raw materials (or inventory) to cash. 𝗪𝗖 𝗖𝘆𝗰𝗹𝗲 - Measures the time it takes for a business to convert its inventory and other resources (other current assets) to cash reduced by trade payables. WC cycle also includes advances and other current assets, unlike an operating cycle. 𝗙𝗼𝗿𝗺𝘂𝗹𝗮: 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗖𝘆𝗰𝗹𝗲 = Inventory Days + Trade Receivable Days 𝗪𝗖 𝗖𝘆𝗰𝗹𝗲 = Inventory days + Trade Receivable Days + Other CA (in days, if any) - Trade Payable Days. From the above definition we can see that a WC cycle is an extended version of the operating cycle considering a holistic view of cash flow incorporating the time it takes to pay off the suppliers. A shorter WC cycle indicates efficient cash flow management of a business.

A&F Tips Cutting Costs Doesn’t Always Increase Profit I have met with many businesses, and they believe that if we cut costs by 10%, our profit will increase by 10%, but I explained that this is not always true Here’s a simple example that shows why that’s not always true 👇 🔹 Company A had: Sales = $100,000 Costs = $80,000 Profit = $20,000 They decided to cut costs by 10% ( $8,000 ) — but that cut removed essential quality control and delayed deliveries. As a result, sales dropped by 15% to $85,000. Now the new results are: Sales = $85,000 Costs = $72,000 Profit = $13,000 👉 Yes, they saved $8,000 in costs — but lost $7,000 in profit. 💡 The lesson: not every cost reduction leads to higher profit. Smart cost control protects value, not just reduces expenses. Malik Ali #CostControl #Finance #Profitability #FractionalCFO

💡 Want smoother operations and faster cash flow? Bill Discounting does more than fund your business — it creates discipline! From raw material to dispatch, your whole system becomes efficient and predictable. Focus on dispatch, and your inventory will manage itself! 🚀 #BillDiscounting #CashFlowMatters #BusinessFinance #SMEGrowth #FinancialDiscipline #SmartOperations #InvoiceDiscounting #BusinessStrategy #WorkingCapital #EntrepreneursIndia #CashFlowSolutions

💡 Want smoother operations and faster cash flow? Bill Discounting does more than fund your business — it creates discipline! From raw material to dispatch, your whole system becomes efficient and predictable. Focus on dispatch, and your inventory will manage itself! 🚀 #BillDiscounting #CashFlowMatters #BusinessFinance #SMEGrowth #FinancialDiscipline #SmartOperations #InvoiceDiscounting #BusinessStrategy #WorkingCapital #EntrepreneursIndia #CashFlowSolutions