Fixed Costs vs. Variable Costs

Fixed costs are expenses that stay relatively constant within a given level of sales. For example, the cost of renting a corporate headquarters is likely to be a constant amount (say, $100,000 per month) regardless of how much revenue the company generates.

Variable costs, as the name implies, vary with the amount of revenue. A good example is sales commissions. More commissions will be paid if the company generates $2 million in sales than if it generates $1 million.

For more information, see all articles on: Common Size Analysis, Financial Statement Analysis, Fundamental Analysis, Ratio Analysis

See also:
  • Operating Leverage
  • Determining Inventory Cost
  • Operating Leverage: A Case Study
  • Risk and Return in Fixed Income Arbitrage
  • Choosing a Fixed Income Manager
  • Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning Points

    The Intelligent Investor: The Classic Text on Value Investing

    Financial Statement Analysis: A Practitioner's Guide, 3rd Edition

    Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)

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