ESB v2 Domain 4
1. Balance Sheet
Q: What does a balance sheet compare?
A: Assets to liabilities plus owner's equity.
2. Income Statement
Q: What does an income statement show?
A: A business's revenue and expenses for a given period.
3. Break-Even Point
Q: What is the break-even point?
A: When a business’s revenue matches its expenses over a given period.
4. Profit Margin
Q: What does profit margin represent?
A: The net profit the company wants to make from the sale, usually in percentage.
5. Selling Price Formula
Q: What is the formula to calculate selling price using desired profit margin?
A: [(Cost) * (Desired Profit Margin)] + Cost
6. Equity Formula
Q: How do you calculate equity?
A: Assets - Liabilities
Selling Price Calculations
1. Ben's Shoe Store
Q: Cost = $18, Profit Margin = 20%
A: $18 × 0.20 = $3.60 → $18 + $3.60 = $21.60
2. Adam's Restaurant
Q: Cost = $6.75, Profit Margin = 33%
A: $6.75 × 0.33 = $2.23 → $6.75 + $2.23 = $8.98
3. Cory's Candle Line
Q: Cost = $8.46, Profit Margin = 52%
A: $8.46 × 0.52 = $4.40 → $8.46 + $4.40 = $12.94
Equity Calculations
1. Mallory’s Auto Shop
Assets: $12,000 + $8,000 = $20,000
Liabilities: $4,000 + $3,500 = $7,500
Equity: $20,000 - $7,500 = $12,500
, 2. Ashley’s Car Sales
Assets: $26,000 + $34,000 = $60,000
Liabilities: $4,600 + $7,900 = $12,500
Equity: $60,000 - $12,500 = $47,500
3. Mindy’s Restaurant
Assets: $14,200 + $2,600 + $5,000 = $21,800
Liabilities: $3,800 + $1,400 = $5,200
Equity: $21,800 - $5,200 = $16,600
Income Calculations
1. Mallory’s Gross Income
Income: $3,800
Cost of Goods: $875
Gross Income: $3,800 - $875 = $2,925
2. Karen’s Net Income
Income: $5,400
Cost of Goods + Expenses: $925 + $3,300 = $4,225
Net Income: $5,400 - $4,225 = $1,175
Break-Even Calculation
1. Gabe’s Nut Cart
Cost: $810
Selling Price: $6 per cup
Break-Even Point: $810 / $6 = 135 cups
Break-Even Calculation
1. Chuck’s Pizza Shop
Q: Chuck sells pizzas at $18 each. His total monthly cost is $2,600. How many pizzas
must he sell to break even?
A: $2,600 ÷ $18 = 145 pizzas
Cost Types
1. Fixed Costs
Definition: Costs that remain the same regardless of production volume.
1. Balance Sheet
Q: What does a balance sheet compare?
A: Assets to liabilities plus owner's equity.
2. Income Statement
Q: What does an income statement show?
A: A business's revenue and expenses for a given period.
3. Break-Even Point
Q: What is the break-even point?
A: When a business’s revenue matches its expenses over a given period.
4. Profit Margin
Q: What does profit margin represent?
A: The net profit the company wants to make from the sale, usually in percentage.
5. Selling Price Formula
Q: What is the formula to calculate selling price using desired profit margin?
A: [(Cost) * (Desired Profit Margin)] + Cost
6. Equity Formula
Q: How do you calculate equity?
A: Assets - Liabilities
Selling Price Calculations
1. Ben's Shoe Store
Q: Cost = $18, Profit Margin = 20%
A: $18 × 0.20 = $3.60 → $18 + $3.60 = $21.60
2. Adam's Restaurant
Q: Cost = $6.75, Profit Margin = 33%
A: $6.75 × 0.33 = $2.23 → $6.75 + $2.23 = $8.98
3. Cory's Candle Line
Q: Cost = $8.46, Profit Margin = 52%
A: $8.46 × 0.52 = $4.40 → $8.46 + $4.40 = $12.94
Equity Calculations
1. Mallory’s Auto Shop
Assets: $12,000 + $8,000 = $20,000
Liabilities: $4,000 + $3,500 = $7,500
Equity: $20,000 - $7,500 = $12,500
, 2. Ashley’s Car Sales
Assets: $26,000 + $34,000 = $60,000
Liabilities: $4,600 + $7,900 = $12,500
Equity: $60,000 - $12,500 = $47,500
3. Mindy’s Restaurant
Assets: $14,200 + $2,600 + $5,000 = $21,800
Liabilities: $3,800 + $1,400 = $5,200
Equity: $21,800 - $5,200 = $16,600
Income Calculations
1. Mallory’s Gross Income
Income: $3,800
Cost of Goods: $875
Gross Income: $3,800 - $875 = $2,925
2. Karen’s Net Income
Income: $5,400
Cost of Goods + Expenses: $925 + $3,300 = $4,225
Net Income: $5,400 - $4,225 = $1,175
Break-Even Calculation
1. Gabe’s Nut Cart
Cost: $810
Selling Price: $6 per cup
Break-Even Point: $810 / $6 = 135 cups
Break-Even Calculation
1. Chuck’s Pizza Shop
Q: Chuck sells pizzas at $18 each. His total monthly cost is $2,600. How many pizzas
must he sell to break even?
A: $2,600 ÷ $18 = 145 pizzas
Cost Types
1. Fixed Costs
Definition: Costs that remain the same regardless of production volume.
