Cost structure
The share of costs that does not fall when activity falls, within a horizon set in advance, expressed as a percentage of total costs. It results from the line-by-line split between fixed and variable costs.
What it changes for the executive
That split appears in no accounting document and cannot be derived from any chart of accounts, yet it governs the break-even point, the margin of safety and the speed at which profit moves. The deciding rule is the time horizon: a cost is variable if it actually falls within the chosen horizon, not if it could theoretically be cancelled one day. An employment contract with three months' notice does not fall within a six-month horizon.
Example
In a services company whose added value is human time, the share of costs that does not fall often exceeds eighty per cent. In a trading company it sometimes falls below thirty. These two companies have nothing in common, even if their accounts look alike.
A term that is missing?
Describe the situation in a few lines; the reply is personal.