by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting
What are Profitability Ratios?Profitability Ratios are used to determine how profitable is a given company as compared to a different company. The most common ratios used for this comparison include: Gross Margin RatioGross margin ratio = Gross margin / Net...
by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting
What is the Working Capital Ratio? The working capital ratio, also called the current ratio, is a liquidity ratio that measures a firm’s ability to pay off its current liabilities with current assets. Current Ratio = Current Assets / Current Liabilities When current...
by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting
What is a Contribution Margin Income Statement?The traditional income statement format used for external financial reporting simply breaks costs down by functional area: cost of goods sold and selling and administrative costs. It does not show fixed and variable...
by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting
What is Cost-Volume-Profit Analysis for Single-Product Company?The profit equation shows that profit equals total revenues minus total variable costs and total fixed costs. Profit = Revenue – Total Variable Costs – Total Fixed CostsThis profit equation is...
by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting
What is the Margin of Safety? Managers often like to know how close projected sales are to the break-even point.The excess of projected sales over the break-even point is called the margin of safety. The margin of safety represents the amount by which sales can fall...
by TheBusinessProfessor | Feb 23, 2025 | Managerial & Financial Accounting & Reporting
What is the Theory of Constraints?The theory of constraints, a variation of differential analysis, is an approach that enables companies to optimize the use of limited resources. Five steps are involved. First, find the constrained resource (or bottleneck). Second,...
