It is calculated by dividing fixed costs by the unit contribution margin (selling price less unit variable cost). It is used in pricing, capacity and cost decisions and in feasibility studies.
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Feasibility studyA study assessing whether an investment is viable from market, technical, financial and legal perspectives.Gross profitProfit calculated by deducting cost of sales from revenue.Financial modellingBuilding a model that forecasts the future financial performance of a company or project, with linked income statement, balance sheet and cash flow.BetaA coefficient measuring the sensitivity of a share's return to changes in the market return, that is, its systematic risk.Capital asset pricing model (CAPM)A model that calculates the cost of equity from the risk-free rate, beta and the market risk premium.Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.
Last updated: October 31, 2026 · This definition is for general information only.