Relief ratio
Hey kid! Do you know what relief ratio means? It's a way to measure how much money you have left after paying all the bills and expenses you have.
Imagine you get $10 as your allowance from your parents. You want to buy a toy that costs $5, and you also have to save $2 for your college fund. This means you have to spend $7 from your $10 allowance.
Relief ratio is like this allowance scenario, but for businesses. Suppose a business earns $100,000 in revenue but has to pay $60,000 for all its expenses like rent, salaries, and materials. The remaining $40,000 is like the money you have left from your allowance after spending on bills and expenses.
Here's the fun part. Relief ratio is the percentage of money a business has left after paying for all the bills and expenses. In our example, we divide the remaining $40,000 by the total revenue ($100,000) and multiply by 100.
Relief ratio = ($40,000/$100,000) x 100 = 40%
So, the relief ratio for our pretend business is 40%. It means they have $0.40 as a profit for every dollar they earn in revenue.
This ratio helps businesses determine if they can survive and either save more money or invest in future ventures. Just like you save your allowance for your college fund, businesses save their profits to improve their products, expand to new locations or invest in other areas to grow their business.
Isn't it cool how even young kids like us can learn about business concepts?
Imagine you get $10 as your allowance from your parents. You want to buy a toy that costs $5, and you also have to save $2 for your college fund. This means you have to spend $7 from your $10 allowance.
Relief ratio is like this allowance scenario, but for businesses. Suppose a business earns $100,000 in revenue but has to pay $60,000 for all its expenses like rent, salaries, and materials. The remaining $40,000 is like the money you have left from your allowance after spending on bills and expenses.
Here's the fun part. Relief ratio is the percentage of money a business has left after paying for all the bills and expenses. In our example, we divide the remaining $40,000 by the total revenue ($100,000) and multiply by 100.
Relief ratio = ($40,000/$100,000) x 100 = 40%
So, the relief ratio for our pretend business is 40%. It means they have $0.40 as a profit for every dollar they earn in revenue.
This ratio helps businesses determine if they can survive and either save more money or invest in future ventures. Just like you save your allowance for your college fund, businesses save their profits to improve their products, expand to new locations or invest in other areas to grow their business.
Isn't it cool how even young kids like us can learn about business concepts?
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