Variable cost ratio is the ratio of variable costs to sales. It equals total variable costs divided by total sales or variable cost per unit divided by price per unit or 1 minus contribution margin ratio.Variable costs are costs which change with a change in output, for example cost of raw...
Financial Leverage Ratio The financial leverage ratio is an indicator of how much debt a company is using to finance its assets. A high ratio means the firm is highly levered (using a large amount of debt to finance its assets). A low ratio indicates the opposite. Example The balance sheet...
Definition: The contribution margin, sometimes used as a ratio, is the difference between a company’s total sales revenue and variable costs. In other words, the contribution margin equals the amount that sales exceed variable costs. This is the sales amount that can be used to, or contribute...
What is a Good WCR Ratio? The standard benchmark for the working capital requirement (WCR) is different per industry, given the differentiating factors, namely around each company’s respective business model, namely its revenue model (i.e. how sales are generated) and its cost structure (i....
LTV/CAC ratio matters most for early-stage SaaS companies, as the KPI provides insights into the cost efficiency of their sales and marketing (S&M) spending, which can determine the sustainability of their business models. The standard benchmark for the ideal LTV/CAC ratio is around 3.0x in...
3. Average settlement period for AP = Average AP/Credit Purchases *365 Liquidity ratios 1. Current ratio = CA/CL 2. Liquid ratio = (CA- Prepayment-inventory)/CL Gearing ratios 1. Gearing = TL/TA 2. Gearing = TL/TE 3. Interest Cover ratio = Operating Profit/Interest Investor ratios...
1.(Sales – Variable cost per unit)MARGIN OF SAFETY [MOP]1.Actual sales – Break even sales 2.Net profit / P/V Ratio 3.Profit / Contribution per unit [In units]3.Sales unit at Desired profit = {Fixed cost + Desired profit} / Cont. per unit 4.Sales value for Desired Profit =...
margin is the ratio of a company’s pretax earnings to its total sales. The higher the ratio, the more profitable the position of the company. Using the information provided above, the pretax earnings margin for Company ABC is $6,915,000 / $8,000,000 (Pretax Earnings/Total Sales) =...
The operating profit margin ratio is a key indicator for investors and creditors to see how businesses are supporting their operations. If companies can make enough money from their operations to support the business, the company is usually considered more stable. On the other hand, if a company...
The contribution margin for Tennis shoes is easiest to calculate: it equals $70, i.e. the difference between sales price ($200) and variable cost per unit ($130).We need to use the contribution margin ratio formula to work out contribution per unit for Football shoes:...