In the dynamic business world, understanding financial metrics is essential for making informed decisions and assessing a company’s performance. Two crucial measures that provide insights into profitability are the contribution margin and gross profit margins. While both these metrics analyze revenue and costs, they serve distinct purposes and offer unique perspectives on a company’s financial…
In finance and accounting, every successful business relies on a solid foundation of organization and structure. Among the key tools that keep financial matters in order is the Chart of Accounts. Whether you’re an aspiring entrepreneur, a small business owner, or a finance professional, understanding this fundamental concept is crucial to manage your company’s financial…
What are the Accounts Receivable Turnover Ratio? The Accounts Receivable Turnover Ratio is a financial ratio that measures how efficiently a company collects payments from its customers. It is calculated by dividing the net credit sales by the average accounts receivable. Accounts Receivable Turnover Ratio Formula The formula for calculating ART is: Accounts Receivable Turnover…
What Is EBITDA Margin? Financial metrics play an important role in evaluating the health of a company. One such metric is the EBITDA margin, which measures a company’s operating profitability and efficiency. By focusing solely on a company’s core operations, the EBITDA margin excludes any financing, tax, or accounting decisions, providing a more accurate view…
What is the current ratio? Are you familiar with the current ratio? It’s a financial metric that assesses a company’s ability to settle its immediate debts using its current assets, indicating its liquidity position. The current ratio is a financial ratio that measures a company’s ability to pay its short-term obligations. In simpler terms, it…
What is deferred revenue? Deferred revenue, also known as unearned revenue or advance payments, refers to the money that a company has received from its customers in advance for goods or services that are yet to be delivered or performed. In other words, deferred revenue represents a liability on the company’s balance sheet that reflects…
What is SG&A? SG&A stands for Selling, General, and administrative expenses. It is an accounting term that describes the costs associated with running a business that is not directly related to producing goods or services. Selling expenses are the costs of promoting and selling a company’s products or services. This includes advertising, sales commissions, trade…
What is LLC? LLC stands for Limited Liability Company. It is a type of legal entity that is separate from its owners, also known as members. LLCs offer a corporation’s liability protection but with a partnership’s tax flexibility. This means the members are not personally responsible for the company’s debts or legal obligations, and their…
What is an invoice An invoice is a commercial document that provides a detailed summary of goods or services, given by a seller to a buyer. It typically includes the quantity, description, price, total cost of the goods or services, and any taxes, discounts, or other fees. In addition, an invoice usually includes the payment…
What is marginal revenue? Marginal revenue is generated by selling one additional unit of a product or service. It is the difference between the revenue generated by the sale of an additional unit and the revenue generated by the sale of the previous unit. In other words, marginal revenue is the change in total revenue…
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