What is Contribution Margin? Explained with example

In cost-volume-profit analysis, a form of management accounting, contribution margin—the marginal profit per unit sale—is a useful quantity in carrying out various calculations, and can be used as a measure of operating leverage. Typically, low contribution margins are prevalent in the labor-intensive service sector while high contribution margins are prevalent in the capital-intensive industrial sector. … Read more

What is the cash conversion cycle? (CCC)?

The cash conversion cycle (CCC) – also known as the cash cycle – is a working capital metric that expresses how many days it takes a company to convert cash into inventory, and then back into cash via the sales process. The shorter a company’s CCC, the less time a company has cash tied up … Read more

What is the Average Collection Period?

The Average Collection Period (ACP) is the time taken by businesses to convert their Accounts Receivables (AR) to cash. ACP is commonly referred to as Days Sales Outstanding (DSO) and helps a business track if they will have enough cash to meet short-term financial requirements. Companies use a variety of tools and calculations to determine … Read more

What is an Accounts Payable Turnover Ratio?

A high accounts payable turnover ratio signals that a company is paying its creditors and suppliers quickly, while a low ratio suggests the business is slower in paying its bills. This is a critical metric to track because if a company’s accounts payable turnover ratio declines from one accounting period to another, it could signal … Read more

Debt Ratio: Types and How to Calculate

It’s important to calculate and analyze the amount of money your company owes in relation to its total assets. In essence, your debt ratio allows you to determine whether or not your company will be able to pay off its liabilities with its assets. What is Debt Ratio The debt ratio is a solvency ratio that measures … Read more