The African Lion Essays - Lions, Leopard, Panthera, The Lion King

The African Lion The lion is known as ruler of the wilderness on account of its tremendous size and savage appearance, the most well-known sort of lion is the African lion. The African lion has the family species Panthera (puma, panther) leo (lion). Panthera leo has the regular name lion and originates from the felidae family. Panthera leo is in the mammali class and has the request carnivora(Bush Gardens, 1996). Lions live in sub-Saharan Africa in prairies and semi-parched fields in prides which is a gathering of lions that live in a similar zone and offer chasing duties(Bush Gardens,1996). Lions are the main really social feline species, typically a pride comprises of two guys, seven females, and any measure of whelps. The lionesses are normally sisters or cousins that have all been together since birth. The normal develop male stands four feet at the shoulder, says something around 450 pounds and is around eight and a half feet long in addition to his tail. The female then again is impressively littler and tips the scales at a normal of 300 pounds. Lions for the most part have a light or dim earthy colored plain immaculate coat, white covered lions are in some cases found in southern Africa yet they are false pale skinned people (African Savannah). The male lion arrives at sexual development at five years old years and the lioness-which is the female lion, arrives at its sexual development at four years old. Lionesses in a pride ordinarily enter rearing season together and later conceive an offspring simultaneously which permits the lionesses to share nursing and other maternal obligations. The lioness is pregnant somewhere in the range of 98 and 105 days until it brings forth a normal of 3 whelps, lamentably just one of those offspring will endure the main year of life because of the cruel conditions in their living spaces (Bush Gardens, 1996). During childbirth the fledglings are visually impaired and move moderate. The fledglings weigh under five pounds (Wild Animals) and are set apart with spots which once in a while remain on their legs and midsection until they are completely developed. (African Savannah). At the point when the fledglings arrive at five months old enough, they gauge a normal of fifty pounds however they despite everything act energetic like a little cat. As a rule, when the offspring arrives at nine months old enough, their spots vanish. At the point when the fledglings go to the age of eighteen months, the mother instructs them to chase (Comptons 1993, 1994). The male lions have an earthy colored mane which becomes darker and more full as the lion ages (African Savannah) and at three years old the mane gradually begins to appear. The normal lion in the wild that lives past the age of one lives somewhere in the range of 15 and 18 years and arrives at its prime or time it is the most grounded at eight years old (African Savannah). Lions eat a wide range of prey and for the most part chase at night(Comptons,1993, 1994-African Savannah). They like to eat wildebeast more than everything else, shockingly they can possibly do so when relocation brings the groups through the prides run. When the wildebeast crowds are not relocating they eat bison, zebra, gazelle, giraffe, and warthogs (African Savannah). At the point when prey cannot be gotten, lions will take food from different creatures as a rule from the hyenas. In the event that positively no food can be discovered, lions should go to a final hotel of eating snakes, termites, peanuts, organic products, and even bad wood (Wild Animals). Albeit just one out of four chasing occasions is effective, prevailing guys consistently eat first, lionesses next, and the offspring are compelled to battle for scraps and extras (Bush Gardens, 1996). Because of the reality the lion is idle up to twenty-one hours every day and does all their chasing around evening time, they must have the option to see around evening time (Bush Gardens, 1996). The size of lions eyes are greater than people and lions just need one 6th of the measure of light people should have the option to see (Garman, 1997). Lions additionally have numerous other extraordinary qualities that assist them with chasing and endure, some are recorded underneath. The grown-up lions thunder can be group up to five miles away, this can be an admonition that there is gatecrashers or it can help manage wandered

International Finance and Law Assignment Example | Topics and Well Written Essays - 750 words

Worldwide Finance and Law - Assignment Example A nearby examination of these two depictions of a similar item gives two unique items. In the principal archive, it is clear that the brokers are managing steel ingots, while in the subsequent record; we can't derive which items the merchants are managing. The main thing we make certain of, as a bank is that they are managing ingots. I would not respect the Letter of Credit, and all things considered, would not make any ensuing installments towards the record. This is on the grounds that the record discusses an item that is totally not the same as the one in the agreement of offer. Thus, the bank would be at risk for respecting a Letter of Credit that has such type of disparities, and all things considered, would be subject to pay any measure of obligation brought about by the harms acquired from this agreement. Besides, it would be hard for the bank to follow the cash paid out to SS, if sometime not too far off the brokers understood the errors in the two agreements and request to stop the agreement, particularly if at all he is a fake individual. Respecting the agreement likewise gives him legitimate rights to decrease obligation to the agreement, and he may decide not to send the items by any means, or send an alternate item, ingots rather than 51 steel ingots to the purchaser (Bamford, 2011) By declining to respect this Letter of Credit, I would host to ask the two gatherings to the agreement to audit the subtleties of their agreement. I would request that they make changes to the agreement and amend the errors before the bank can discharge any installment upon the request made. For example, I would send a letter to MM educating him regarding the distinction in portrayal of the merchandise between the Contract of offer and the Letter of Credit. This implies the products that the letter of credi requests installment upon are not similar ones talked about in the agreement of offer. In this way, he needs to explain which merchandise he is paying for, and what is the worthy market cost of these products. It may likewise

Ultimate Guide to Unit Economics

Ultimate Guide to Unit Economics The study of economics is not really something that we can get away from; it is in every aspect of our daily lives, although in varying scale. If you are involved in business, understanding unit economics is very important. However, not everyone is all that keen on the idea of studying economics. It does sound, after all, like a complicated subject. Especially when taken in the context of analyzing the performance of a company and predicting its growth potential, it sounds like a very difficult task to accomplish.If you look at the practice of most analysts, you will find that they are looking at the financials of businesses on a company-wide basis, or even referring to industry and market trends. However, the predictive value is much higher when analysis is done on a unit-level basis, or through unit economic analysis. © Shutterstock.com | retrorocketIn the succeeding discussions, we will be looking deeper into the concept of unit economics in order to understand 1) the unit economics  and 2) unit economics analysis.UNIT ECONOMICSUnit economics is defined as the “direct revenues and costs associated with a particular business model, and are specifically expressed on a per unit basis”. Some even go so far as say that unit economics are the fundamental or basic financial building blocks of a business. It is the starting point for management, outside analysts, investors, and other stakeholders to analyze, evaluate or assess a company’s financial performance.All businesses work around a financial model that is designed specifically according to their key assumptions and for the accomplishment of their organizational goals. A lot of resources go into making sure that all the bases are covered, from their product to the market that they are in. However, there is one other factor that should always be taken into account: the company’s economics, and if it is reasonable under the circumstances.Startups or businesses that are relatively new and just getting off the ground are sure to feel daunted by the thought of having to look into the economics of their financial model. That is why unit economics is very helpful. This way, the intimidating and seemingly large and long-winding process is broken down into smaller, more manageable tasks. By using a unit economics model, work can be divided, attention can be distributed equally among all the important points, and the job can be done.By gaining an understanding of unit economics,The key points of a business’ financial model will make more sense;Management will have an easier time determining break-even points and contribution margins, to aid in decision-making;Calculation of return on investment and other profitability tests will be facilitated; andForecasting or predicting the future profitability of the company will be easi er.UNIT ECONOMICS ANALYSISIdentify the UnitWe have already determined that unit economics figures are expressed on a per unit basis. Therefore, the first thing you should do when it comes to analyzing a company’s unit economics is to pick, determine, or identify the unit.The “unit” is the fundamental business measurement, and it will depend on the nature of the company or business operations. Here are some examples:Merchandising or manufacturing company: Usually, the unit is the customer, but the unit can also be based on a product segment. Therefore, one customer is one unit. A bag retail store’s unit is a buyer, while the unit of a shoe manufacturer is a purchaser of shoes.Service provider: One client represents one unit. The unit of an internet service provider is a user.The examples above described companies with single units. That is not a fixed setup, though, since there are some businesses that have multiple units.Infrastructure service provider: There are instances w hen a provider’s service is made available in different geographical locations. Telecommunications companies, for instance, have their physical infrastructure, such as wireless towers and data centers, distributed in various places. It follows that each of these physical infrastructure come attached with significant capital investment. In this case, the unit is not just the customer, but also physical infrastructure itself. In cases where there are multiple units, it is advised that a core unit be identified, with the other units designated as secondary units.Identify the Fundamental Unit EconomicsOnce the unit has been determined and clearly pinned down, it is time to identify the exact unit economics of the business.One of the examples previously mentioned was the internet service provider. This company’s unit is the user, and it has two fundamental unit economics:Cost to acquire or recruit one user (or the Cost per Acquisition). This answers the question, “how much will the company spend in order to get one user to avail of its internet service?”The amount of revenue generated from one user for the entire length of time that he or she avails of and uses your internet service. This is also called LTV, or Customer Lifetime Value.In the case of a retail store, its unit economics will be concerned with the amount of revenue generated every month for every active buyer that it was able to acquire or recruit. Some express it as “average monthly revenue per customer” or “average weekly revenue per customer”, depending on the period used by the company for its unit economics analysis.Perform Calculations: Inflows and OutflowsNow that you were able to identify your unit and the levels of unit economics applicable to your business, it is time to proceed to the calculations in order to build your unit economic model. There are several inputs that are required in your calculations, and they are classified according to what you are calculating: inflow or outflow.1. Inflow inputsRevenueRevenue refers to the receipts or income that a company receives and earns from its normal operations or business activities, be it the sale of products or of services. While it is true that there are also revenue derived from non-operating sources, these are often one-time events only and non-recurring. Thus, they are not usually considered when analyzing the profitability and financial performance of a business.For easier understanding, it would be a good idea to present in relative detail the various revenue drivers of the business. The most common revenue drivers include the following:The customersWho are your customers?How many customers does the business have?What do you do to attract new customers?What are you doing to foster customer loyalty and keep them coming back?Frequency of purchase or transaction by the customersHow often does the customer buy your product or service?What do you do to encourage customers to buy more frequently?Size of t he transactionWhat is the average transaction size?How big is the order?How many products or services are purchased or availed of?What do you do to encourage customers to buy more?PriceHow much are you selling your product or service for?How much is the customer paying for the product or service?What pricing strategies do you have in place?DurationThis input refers to the usable life of the unit that you have previously identified.In the example where the unit is the customer or the user, the duration is the average customer or user life or lifetime. In the telecommunications company example, the duration is the useful life of the physical asset (wireless tower or data center) that was set up.It could be expressed in months or years, depending on the coverage or period you want to analyze your business viability.2. Outflow inputsCapital Expenditures (CapEx)Capital expenditures are expenditures incurred by a company that has an impact on the future of the business as a whole. The mos t common CapEx transactions involve the purchase of fixed assets or a business segment, major repair or upgrade of a fixed asset that extends its useful life, or construction of a new fixed asset.A clear distinction must be made between CapEx and Revenue Expenditures. Revenue expenditure are the operating expenses that are incurred by the business over the short-term, most often over the normal operating cycle of the business, and do not essentially prolong the life of assets or their usability.For example, the construction of a new factory building is a capital expenditure; the salaries of the cleaning staff of the building are revenue expenditures. Replacement of the roof of the factory building will fall under capital expenditures; the repair of a couple of broken roof tiles will be classified as revenue expenditures.Cost per Acquisition (CPA) or Cost to Acquire a Customer (CAC)This is the initial cost incurred by the business to acquire or recruit a customer. Its components incl ude the variable costs of selling, marketing expenses and other costs that can be directly identified with activities that are aimed at acquiring customers and persuading them to purchase the company’s product or service.The costs will depend on the customer lifecycle or conversion behavior, so they will naturally vary from industry to industry and company to company.In the example of an internet company that sells applications and widgets, the CAC will include the following costs:Cost of investment in a search engine marketing campaignCost of advertising in social media networks (Facebook, Twitter)Let us assume that the company invested $1,000 in a search engine marketing campaign, and $500 in online advertising. At the end of the month, statistics showed that 450 visitors clicked on the offer from the marketing campaign, and 100 from the social media platforms. That means that the company has spent $2.72 ($1,500 / 550 visitors) for each visitor or potential customer. This is the Cost per Visitor.Out of the total 550 visitors, 200 purchased a widget or an app from the company. Those 200 visitors have been successfully converted into customers. This means that the company has a conversion rate of 40%, computed by dividing the 550 visitors by the 200 purchasing customers.To get the final CPA or CAC, divide the cost per visitor by the conversion rate.Cost per Acquisition     = $2.72 / 40%     = $6.80Marginal Operating CostsThese are the ongoing costs incurred by the business to continue serving the customer (and keep him). In the case of an infrastructure business, it is the cost that is continuously incurred by the business to operate the physical infrastructure unit over its life. For example, it includes the cost of repairs and maintenance of the data centers and wireless towers over their respective useful lives.Maintenance Capital ExpendituresThese are specifically applicable to infrastructure businesses and other similar entities that identified phys ical assets or infrastructures as their core unit. It is a reality that the value of physical assets decrease over time, so maintenance costs or maintenance capital expenditures should be factored into the unit economics of the business. Although the expenditures do not necessarily increase the life of the assets, they keep it operating while meeting a certain standard of quality already expected of the asset.Perform Calculations: The Contribution MarginUsing the inputs enumerated above, you will be able to start your calculations, starting with the Contribution Margin.The Contribution Margin is the figure that represents the amount that the company’s revenues will contribute to its fixed costs and net income, after all variable expenses and costs have been deducted. Another simple description of it would be as the amount of cash that a unit contributes to cover the overhead and other fixed expenses of the business.Contribution margin is especially important in unit economic model s â€" and all business models as a whole â€" because it is also a representation of the profitability of individual products, of entire product lines or business segment, and of the whole business.The key computations are as follows:Contribution Margin                                             =                       Revenue â€" Variable CostsContribution Margin Ratio                       =                         (Revenue â€" Variable Costs) / RevenueBy computing the contribution margin, you will be able to know the number of months it would take for a unit to produce a positive contribution margin.Illustration:The bag retail store’s unit is a single customer. It has been determined that one customer purchases an average of one bag per month, at an average price of $100. On average, a customer remains loyal to the store for 12 months. For the first month, there were 125 customers, increasing by 10% in the succeeding months. The computed variable cost per bag is $65, while the store incurs monthly fixed expenses of $6,000.Contribution margin per bag=$100 $65=$35Total contribution margin=$12,500 $8,125=$4,375Contribution margin ratio=$ 35 / $100=35%Perform Calculations: The Break-even PointIn a customer-oriented business that has identified a customer as its unit, the break-even point analysis will help them figure out how many customers are needed in order to break even, and then turn up a profit. The break-even point is the level of sales where the costs will equal the revenue, so that the company is neither earning an income nor incurring a loss.Continuing from the earlier illustration, the break-even point is computed as follows:Break-even point (in sales)=Fixed Costs / Contribution margin ratio=$6,000 / 35%=$17,143In order to break even, 172 customers should purchase one bag at $100 at the store ($17,143 / $100 per bag = 172 customers).From the assumption stated, the following figures can be estimated as to the number of customers per month.Month 1 125 customersMonth 2138 customersMonth 3152 customersMonth 4168 customersMonth 5185 customersMonth 6204 customersThe break-even computation indicates that the company will only break even on the 5th month, and even turn a profit by then. Take a look at the summarized table below.Month 1Month 2Month 3Month 4Month 5Month 6Sales12,50013,80015,20016,80018,50020,400Variable Costs(8,125)(8,970)(9,880)(10,920)(12,025)(13,260)Cont. Margin4,3754,8305,3205,8806,4757,140Fixed Costs(6,000)(6,000)(6,000)(6,000)(6,000)(6,000)Income (Loss)(1,625)(1,170)(680)(120)4751,140The table indicates that the store will sustain a loss in its first 4 months. Somewhere halfway through the 5th month, it will reach its break-even point, and by the end of Month 5, will have turned up a profit.CONCLUSIONForecasting is one of the many activities that businesses cannot do without, and unit economics forecasting is seen as one of the key metrics and best tools for management to come up with decisions for its business operations. Thus, it is important for you to make unit economics as an integral part of your business model.Performing financial analysis, or trying to see if your business engine is working as it should, will not be easy if you do not have a unit economic model in place. If you plan on taking your business all the way, and you have long-term goals for it, it is even more imperative to build your own unit economic model.Unit economics will help management to perform pertinent calculations to ultimately reveal the viability of the business. Making management decisions is left in the shoulders of management, and they will need all the unit economic model as basis for their decisions.[slideshare id=37137015doc=uniteconfinancials-140718145547-phpapp01]

Ultimate Guide to Unit Economics

Ultimate Guide to Unit Economics The study of economics is not really something that we can get away from; it is in every aspect of our daily lives, although in varying scale. If you are involved in business, understanding unit economics is very important. However, not everyone is all that keen on the idea of studying economics. It does sound, after all, like a complicated subject. Especially when taken in the context of analyzing the performance of a company and predicting its growth potential, it sounds like a very difficult task to accomplish.If you look at the practice of most analysts, you will find that they are looking at the financials of businesses on a company-wide basis, or even referring to industry and market trends. However, the predictive value is much higher when analysis is done on a unit-level basis, or through unit economic analysis. © Shutterstock.com | retrorocketIn the succeeding discussions, we will be looking deeper into the concept of unit economics in order to understand 1) the unit economics  and 2) unit economics analysis.UNIT ECONOMICSUnit economics is defined as the “direct revenues and costs associated with a particular business model, and are specifically expressed on a per unit basis”. Some even go so far as say that unit economics are the fundamental or basic financial building blocks of a business. It is the starting point for management, outside analysts, investors, and other stakeholders to analyze, evaluate or assess a company’s financial performance.All businesses work around a financial model that is designed specifically according to their key assumptions and for the accomplishment of their organizational goals. A lot of resources go into making sure that all the bases are covered, from their product to the market that they are in. However, there is one other factor that should always be taken into account: the company’s economics, and if it is reasonable under the circumstances.Startups or businesses that are relatively new and just getting off the ground are sure to feel daunted by the thought of having to look into the economics of their financial model. That is why unit economics is very helpful. This way, the intimidating and seemingly large and long-winding process is broken down into smaller, more manageable tasks. By using a unit economics model, work can be divided, attention can be distributed equally among all the important points, and the job can be done.By gaining an understanding of unit economics,The key points of a business’ financial model will make more sense;Management will have an easier time determining break-even points and contribution margins, to aid in decision-making;Calculation of return on investment and other profitability tests will be facilitated; andForecasting or predicting the future profitability of the company will be easi er.UNIT ECONOMICS ANALYSISIdentify the UnitWe have already determined that unit economics figures are expressed on a per unit basis. Therefore, the first thing you should do when it comes to analyzing a company’s unit economics is to pick, determine, or identify the unit.The “unit” is the fundamental business measurement, and it will depend on the nature of the company or business operations. Here are some examples:Merchandising or manufacturing company: Usually, the unit is the customer, but the unit can also be based on a product segment. Therefore, one customer is one unit. A bag retail store’s unit is a buyer, while the unit of a shoe manufacturer is a purchaser of shoes.Service provider: One client represents one unit. The unit of an internet service provider is a user.The examples above described companies with single units. That is not a fixed setup, though, since there are some businesses that have multiple units.Infrastructure service provider: There are instances w hen a provider’s service is made available in different geographical locations. Telecommunications companies, for instance, have their physical infrastructure, such as wireless towers and data centers, distributed in various places. It follows that each of these physical infrastructure come attached with significant capital investment. In this case, the unit is not just the customer, but also physical infrastructure itself. In cases where there are multiple units, it is advised that a core unit be identified, with the other units designated as secondary units.Identify the Fundamental Unit EconomicsOnce the unit has been determined and clearly pinned down, it is time to identify the exact unit economics of the business.One of the examples previously mentioned was the internet service provider. This company’s unit is the user, and it has two fundamental unit economics:Cost to acquire or recruit one user (or the Cost per Acquisition). This answers the question, “how much will the company spend in order to get one user to avail of its internet service?”The amount of revenue generated from one user for the entire length of time that he or she avails of and uses your internet service. This is also called LTV, or Customer Lifetime Value.In the case of a retail store, its unit economics will be concerned with the amount of revenue generated every month for every active buyer that it was able to acquire or recruit. Some express it as “average monthly revenue per customer” or “average weekly revenue per customer”, depending on the period used by the company for its unit economics analysis.Perform Calculations: Inflows and OutflowsNow that you were able to identify your unit and the levels of unit economics applicable to your business, it is time to proceed to the calculations in order to build your unit economic model. There are several inputs that are required in your calculations, and they are classified according to what you are calculating: inflow or outflow.1. Inflow inputsRevenueRevenue refers to the receipts or income that a company receives and earns from its normal operations or business activities, be it the sale of products or of services. While it is true that there are also revenue derived from non-operating sources, these are often one-time events only and non-recurring. Thus, they are not usually considered when analyzing the profitability and financial performance of a business.For easier understanding, it would be a good idea to present in relative detail the various revenue drivers of the business. The most common revenue drivers include the following:The customersWho are your customers?How many customers does the business have?What do you do to attract new customers?What are you doing to foster customer loyalty and keep them coming back?Frequency of purchase or transaction by the customersHow often does the customer buy your product or service?What do you do to encourage customers to buy more frequently?Size of t he transactionWhat is the average transaction size?How big is the order?How many products or services are purchased or availed of?What do you do to encourage customers to buy more?PriceHow much are you selling your product or service for?How much is the customer paying for the product or service?What pricing strategies do you have in place?DurationThis input refers to the usable life of the unit that you have previously identified.In the example where the unit is the customer or the user, the duration is the average customer or user life or lifetime. In the telecommunications company example, the duration is the useful life of the physical asset (wireless tower or data center) that was set up.It could be expressed in months or years, depending on the coverage or period you want to analyze your business viability.2. Outflow inputsCapital Expenditures (CapEx)Capital expenditures are expenditures incurred by a company that has an impact on the future of the business as a whole. The mos t common CapEx transactions involve the purchase of fixed assets or a business segment, major repair or upgrade of a fixed asset that extends its useful life, or construction of a new fixed asset.A clear distinction must be made between CapEx and Revenue Expenditures. Revenue expenditure are the operating expenses that are incurred by the business over the short-term, most often over the normal operating cycle of the business, and do not essentially prolong the life of assets or their usability.For example, the construction of a new factory building is a capital expenditure; the salaries of the cleaning staff of the building are revenue expenditures. Replacement of the roof of the factory building will fall under capital expenditures; the repair of a couple of broken roof tiles will be classified as revenue expenditures.Cost per Acquisition (CPA) or Cost to Acquire a Customer (CAC)This is the initial cost incurred by the business to acquire or recruit a customer. Its components incl ude the variable costs of selling, marketing expenses and other costs that can be directly identified with activities that are aimed at acquiring customers and persuading them to purchase the company’s product or service.The costs will depend on the customer lifecycle or conversion behavior, so they will naturally vary from industry to industry and company to company.In the example of an internet company that sells applications and widgets, the CAC will include the following costs:Cost of investment in a search engine marketing campaignCost of advertising in social media networks (Facebook, Twitter)Let us assume that the company invested $1,000 in a search engine marketing campaign, and $500 in online advertising. At the end of the month, statistics showed that 450 visitors clicked on the offer from the marketing campaign, and 100 from the social media platforms. That means that the company has spent $2.72 ($1,500 / 550 visitors) for each visitor or potential customer. This is the Cost per Visitor.Out of the total 550 visitors, 200 purchased a widget or an app from the company. Those 200 visitors have been successfully converted into customers. This means that the company has a conversion rate of 40%, computed by dividing the 550 visitors by the 200 purchasing customers.To get the final CPA or CAC, divide the cost per visitor by the conversion rate.Cost per Acquisition     = $2.72 / 40%     = $6.80Marginal Operating CostsThese are the ongoing costs incurred by the business to continue serving the customer (and keep him). In the case of an infrastructure business, it is the cost that is continuously incurred by the business to operate the physical infrastructure unit over its life. For example, it includes the cost of repairs and maintenance of the data centers and wireless towers over their respective useful lives.Maintenance Capital ExpendituresThese are specifically applicable to infrastructure businesses and other similar entities that identified phys ical assets or infrastructures as their core unit. It is a reality that the value of physical assets decrease over time, so maintenance costs or maintenance capital expenditures should be factored into the unit economics of the business. Although the expenditures do not necessarily increase the life of the assets, they keep it operating while meeting a certain standard of quality already expected of the asset.Perform Calculations: The Contribution MarginUsing the inputs enumerated above, you will be able to start your calculations, starting with the Contribution Margin.The Contribution Margin is the figure that represents the amount that the company’s revenues will contribute to its fixed costs and net income, after all variable expenses and costs have been deducted. Another simple description of it would be as the amount of cash that a unit contributes to cover the overhead and other fixed expenses of the business.Contribution margin is especially important in unit economic model s â€" and all business models as a whole â€" because it is also a representation of the profitability of individual products, of entire product lines or business segment, and of the whole business.The key computations are as follows:Contribution Margin                                             =                       Revenue â€" Variable CostsContribution Margin Ratio                       =                         (Revenue â€" Variable Costs) / RevenueBy computing the contribution margin, you will be able to know the number of months it would take for a unit to produce a positive contribution margin.Illustration:The bag retail store’s unit is a single customer. It has been determined that one customer purchases an average of one bag per month, at an average price of $100. On average, a customer remains loyal to the store for 12 months. For the first month, there were 125 customers, increasing by 10% in the succeeding months. The computed variable cost per bag is $65, while the store incurs monthly fixed expenses of $6,000.Contribution margin per bag=$100 $65=$35Total contribution margin=$12,500 $8,125=$4,375Contribution margin ratio=$ 35 / $100=35%Perform Calculations: The Break-even PointIn a customer-oriented business that has identified a customer as its unit, the break-even point analysis will help them figure out how many customers are needed in order to break even, and then turn up a profit. The break-even point is the level of sales where the costs will equal the revenue, so that the company is neither earning an income nor incurring a loss.Continuing from the earlier illustration, the break-even point is computed as follows:Break-even point (in sales)=Fixed Costs / Contribution margin ratio=$6,000 / 35%=$17,143In order to break even, 172 customers should purchase one bag at $100 at the store ($17,143 / $100 per bag = 172 customers).From the assumption stated, the following figures can be estimated as to the number of customers per month.Month 1 125 customersMonth 2138 customersMonth 3152 customersMonth 4168 customersMonth 5185 customersMonth 6204 customersThe break-even computation indicates that the company will only break even on the 5th month, and even turn a profit by then. Take a look at the summarized table below.Month 1Month 2Month 3Month 4Month 5Month 6Sales12,50013,80015,20016,80018,50020,400Variable Costs(8,125)(8,970)(9,880)(10,920)(12,025)(13,260)Cont. Margin4,3754,8305,3205,8806,4757,140Fixed Costs(6,000)(6,000)(6,000)(6,000)(6,000)(6,000)Income (Loss)(1,625)(1,170)(680)(120)4751,140The table indicates that the store will sustain a loss in its first 4 months. Somewhere halfway through the 5th month, it will reach its break-even point, and by the end of Month 5, will have turned up a profit.CONCLUSIONForecasting is one of the many activities that businesses cannot do without, and unit economics forecasting is seen as one of the key metrics and best tools for management to come up with decisions for its business operations. Thus, it is important for you to make unit economics as an integral part of your business model.Performing financial analysis, or trying to see if your business engine is working as it should, will not be easy if you do not have a unit economic model in place. If you plan on taking your business all the way, and you have long-term goals for it, it is even more imperative to build your own unit economic model.Unit economics will help management to perform pertinent calculations to ultimately reveal the viability of the business. Making management decisions is left in the shoulders of management, and they will need all the unit economic model as basis for their decisions.[slideshare id=37137015doc=uniteconfinancials-140718145547-phpapp01]