Basic Concept
The symmetry of "variable cost" is symmetrical. There is no fees for changes in the production (or single engineering, single equipment) production (workload), such as corporate management fees, sales fees, and workshop production management personnel salary, employee benefits, office fees, fixed assets depreciation fees, Repair fee, etc. Commonly expressed in English.
Fixed fee payment ratio deduct interest and tax before earnings + fixed cost (before tax) divided by fixed cost + interest.
This ratio can be used as an assessment company to deal with fixed financing expenses, such as interest and lease expenses.
cost multiple
The fixed cost guarantee multiplication is a reflection of the reflection after the fixed cost spending of the rental fee. Ability of the ability. Sometimes the fixed cost guarantee must be called the multiple of the fixed cost.
The calculation of the fixed cost guarantee factor indicates that the company pays all of its fixed debt. The larger the value of the calculation results, the better.
Calculating Formula
fixed cost guarantee multiple = (Profit + Lease Debilities before paying tax and interest) / (All interest cost + rental debt)
guarantee The use of multiple indicators The fixed cost security multiple indicators reflect the long-term solvency of the company, and all long-term debts will be considered. The fixed cost guarantee is at least equal to 1, otherwise the company is unable to repay the long-term debt of the company's expiration. The higher the indicator, the stronger the company's solvency.
It is obvious that the lack of fixed operating costs will threaten the business of the company, so that the business is difficult to maintain a good state. Many of the agreements on operating capital are clearly stipulated that companies must maintain a fixed cost guarantee multiple ratio at a certain level. This provision can guarantee that the borrower is repaid.