This document defines key financial terms like gross margin, cost of goods sold, variable costs, fixed costs, and contribution margin. It explains that gross margin is calculated as sales minus cost of goods sold and lists the components of cost of goods sold. It also defines variable and fixed costs and how contribution margin is calculated as sales minus variable costs. The document notes that break-even point can be calculated based on fixed costs and contribution margin percentage and lists the three core financial statements.

1. Gross Margin
Sales
-COGS
Gross Margin

2. Cost of Goods Sold
• Materials
• Labor
• Overhead (OH)

3. Variable Costs
• Expenses that changes in proportion to production or
sales volume

4. Fixed Costs
• Expenses that are not dependent on level of goods
produced.

5. Contribution Margin
• Sales less Variable costs

6. G&A as Percentage of Sales
• Net Sales divided by General and Administrative
Expenses.

7. Fixed Costs/Contribution Margin%
Break-even point based on sales dollars.

8. Core Financial Statements
Balance Sheet
Income Statement
Statement of Cash Flow

9. Why is Break-Even Important?
Cash From Operations
Profitability
Eliminate make up on “volume” mentality