Articles

What is Contribution Margin? | Ratio Calculation

Analyzing a company’s income statement yields many insights about the efficiency and effectiveness of operations, especially as it relates to sales and variable costs. The contribution margin is a metric that illustrates profitability, before fixed expenses are factored into the equation. Below are additional details about the contribution margin, and how this important metric impacts …

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What is the Difference Between Gross Sales and Net Sales?

Revenue is among the most important financial metrics on the income statement and in comparative financial statements, but it’s not always straightforward to analyze. There is a difference between gross sales and net sales, and these differences give leaders insight into the efficiency and effectiveness of the sales and marketing process. Credit policies and other …

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Absorption Costing Income Statement

Manufacturing companies have choices in the way they determine and report their profits. Some choose to utilize the absorption costing income statement while others choose the variable costing income statement. Both income statements offer their own set of advantages and disadvantages. However, the absorption costing method conforms with the generally accepted accounting principles, and it offers a …

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Four of the Most Important Financial Ratios

Besides delivering a quantifiable method for tracking performance, accounting also enables people to evaluate operations. Courtesy of a never-ending financial ratios list, professionals can utilize various calculations from financial statements to pinpoint the standing of their company. In fact, one of the most powerful ways to utilize income statements is to conduct in-depth ratio analyses …

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Maximizing Efficiency by Understanding the Return on Sales Formula

In almost every businesses, generating sales is arguably the most important part of operations. After all, the ultimate goal of entrepreneurship is to facilitate a constant stream of free cash flow. In order to evaluate efficiency, however, business owners must be familiar with everything from the income statement and cash flows to financial ratios like …

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