Stock market terms often feel complex, but they become simple when explained with real-life examples. Using a tea shop example, we can understand sales, capex, EBITDA, operating leverage, diversification, acquisitions, and more.
Brownfield vs Greenfield
Expanding an existing shop = Brownfield.
Building a new shop from scratch = Greenfield.
Sales / Top Line
Sales = Volume × Price. Selling 10 cups at ₹10 = ₹100 in revenue.
Fixed and Variable Costs
Rent is fixed. Raw materials and labor are variable. When sales rise but fixed costs remain the same — profits grow rapidly.
Operating Leverage
More sales with same fixed costs = big jump in profits.
Capex
Spending to grow the business = Growth Capex.
Spending to maintain the business = Maintenance Capex.
Value Addition & Product Mix
Adding ginger tea, cardamom tea, etc., increases pricing power.
Acquisition vs Diversification
Buying a nearby tea shop = Acquisition.
Starting unrelated businesses = Unwanted diversification.
Gross Profit and EBITDA
Gross profit = Sales − Raw material cost. EBITDA = Operating profit before interest, tax, depreciation.
Net Profit
Profit after all expenses — the actual money earned.
Backward Integration
Producing your own raw materials — like owning a dairy farm for your tea shop.
These simple explanations help understand concepts used by every listed company.