Grasping the Idea of Sunk Cost Ever found yourself entrenched in a controversial business situation where you’re holding on to a failing project or initiative because you’ve invested so much time, money, or resources already? You may not realize it, but you are dealing with what economists label as a “sunk cost.” In its most […]
What is Marginal Cost
Understanding Marginal Cost The term ‘marginal cost’ is pivotal for any business, particularly when it comes to making critical decisions related to production and pricing. Marginal cost simply refers to the expense incurred by a business to produce one additional unit of a product or service. Understanding the concept of marginal cost is essential to […]
What is Opportunity Cost
**Understanding Opportunity Cost** Opportunity cost is a key principle in economics, but its value also extends to the business world and various professional fields, including LinkedIn’s many services. While it may seem like an abstract concept, recognizing and applying it can be game-changing in decision-making scenarios, particularly in managing your LinkedIn profile and using the […]
What is Serviceable Obtainable Market (SOM)
Understanding Serviceable Obtainable Market (SOM) If you’re involved in the business world, particularly in areas such as marketing, sales, or product development, you’ve probably come across terms like Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM). Of these, the Serviceable Obtainable Market often tends to perplex or intrigue the most. […]
What is Serviceable Available Market (SAM)
Understanding Serviceable Available Market (SAM) The Serviceable Available Market, popularly known as SAM, refers to the segment of the Total Available Market (TAM) that a particular product or service can reach. It is the portion of the market that a business can service, given its business model, resources, and geographical capabilities. In the realm of […]
What is Total Addressable Market (TAM)
Understanding Total Addressable Market (TAM) Total Addressable Market, often abbreviated as TAM, is a common business and marketing term that refers to the overall revenue opportunity available for a product or service. It provides an estimation of the maximum amount of revenue a business can generate by fully saturating the market for its product or […]
What is Cash Conversion Cycle (CCC)
Cash conversion cycle (CCC), also known as the net operating cycle or just the cash cycle, is a measure of how effectively a firm manages its working capital. It offers a comprehensive view of a company’s operational efficiency, from procuring raw materials to making sales and collecting payments. A lower CCC means greater liquidity, faster […]
What is DIO (Days Inventory Outstanding)
Days Inventory Outstanding (DIO), more commonly known as the average inventory period, is a financial metric that acknowledges the average number of days a company takes to turn its inventory into sales. As a part of the cash conversion cycle (CCC), this ratio is calculated by dividing the cost of inventory by the cost of […]
What is DPO (Days Payable Outstanding)
Days Payable Outstanding, commonly known as DPO, represents the average period it takes a company to settle its bills and invoices from trade creditors, such as suppliers. Essentially, it shows how long a company utilizes its trade credit before making payments to its suppliers. DPO plays an essential role in managing a company’s cash and […]
What is DSO (Days Sales Outstanding)
Understanding DSO (Days Sales Outstanding) DSO, or Days Sales Outstanding, is a critical measure in the financial world, especially for businesses intending to maintain healthy cash flow. It is a type of calculation used in accountancy to measure the average number of days that a company takes to collect payment after a sale has been […]