Reading the accounts
Fixed costs
Costs that do not change with how much a company sells, at least in the short run.
How it works
Rent, salaried staff, depreciation on plant and much of research spending stay roughly constant whether sales rise or fall. Variable costs move with volume.
The mix of fixed and variable determines operating leverage, and with it how a company behaves in a downturn.
Related terms
- Operating leverageHow much profits amplify revenue changes, because some costs stay fixed as sales move.
- BreakevenThe level of sales at which revenue exactly covers costs and profit is zero.
- Cost of goods soldThe direct costs of producing the goods or services a company sold.
- Operating expensesThe costs of running the business that are not tied directly to producing each unit sold.
More in Reading the accounts
- Free cash flow
- Economic profit
- GAAP and IFRS
- Earnings per share
- Going concern
- Earnings growth
- Goodwill
- EBITDA
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.