How to Explain Contribution Margin Analysis: Examples and Limitations
“Explain Contribution Margin Analysis! Miss Hanes, I would like you to review the techniques used by our previous financial analyst. Be ready to …
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Understanding Accounts Receivable Turnovers: The Activity Ratio Explained
The collection & conversion of accounts receivable into actual cash is technically termed as a turnover. Selling on account or credit terms, …
Continue ReadingWays for Converting Fixed Costs to Variable Costs
The proportion of fixed costs to variable costs affects pricing and profits. Firms with high fixed costs need to sell a higher number of units to …
Continue ReadingWhat Is the Revenue Recognition Principle?
The age-old maxim “Don’t count your chickens before they’re hatched,” finds its manifestation in accounting principles such as the …
Continue ReadingAnalyzing Gross Margin Calculation: Examples and Explanations, Part 1
Explaining gross margin calculation is best presented by way of example. Appreciation for this profit analysis tool can be attained by knowing how to …
Continue ReadingWhat Are the Limitations of Activity Based Costing
Activity-based costing provides many benefits such as accurate pricing, better allocation of resources, elimination of non-value adding activities, …
Continue ReadingAdjusting Entries for Closing Inventory: Calculating the Net Profit of the Company
Both beginning and ending inventory amounts are crucial figures that affect a number of other financial metrics. To make sure these values are as …
Continue ReadingComparing Accounts Payable vs. Accrued Expenses Payable
Our comparison of accounts payable vs accrued expenses payable broaches not only the definitions of those accounts but also the accounting entries …
Continue ReadingExplicit Cost vs. Implicit Cost: Exploring the Major Differences
An understanding of implicit and explicit costs is important to determine the actual costs of an endeavor or to determine actual profits. Read on to …
Continue ReadingHow To Create a Capital Expenditure Budget
“Capital expenditure budget? Do you want to say that my request will not be approved because it is not included in that budget, Miss Kelly? …
Continue ReadingUnderstanding EBIT vs. EBITDA: Differences in Credit Risk Analysis
In comparing EBIT vs EBITDA, most of the differences in their use as credit risk analysis tools pertain to the differences of outlooks in the …
Continue ReadingUses of EBITDA Calculation in Credit Risk Analysis
In explaining EBITDA calculation, examples on how it is used in credit risk analysis are provided. This is to emphasize that the EBITDA concept is not …
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