Contribution Margin and Contribution Margin Ratio

Formulas to calculate contribution margin and contribution margin ratio: Contribution Margin = sales – variable costs. Contribution Margin Ratio = (sales – variable costs)/sales. Contribution margin and contribution margin ratio definition and explanation: Contribution margin is the amount generated by Read More

Net Cash Flows for Investing Ratio

Net Cash Flow for Investing = (purchase of fixed assets and securities) / net cash flows from financing activities. Net cash flows for investing ratio definition and explanation: The net cash flows for investing ratio determines the adequacy of debt Read More

Cash Flow Coverage Ratio

Formula to calculate cash flow coverage ratio: Cash Flow Coverage Ratio = net income + depreciation and amortization/total debt payments. Cash flow coverage ratio definition and explanation: The cash flow coverage ratio indicates the ability to make interest and principal Read More

Altman z-score

Formula to calculate Altman’s Z-Score: z-score = 1.2 a + 1.4 b + 3.3 c + d + .6 f e g where : a = working capital, b = retained earnings, c = operating income, d = sales, e Read More

Turnover Ratios Formulas and Explanations

The turnover ratios and other ratios are key to understanding financial statements. Our ratio calculation spreadsheets reduce time and effort in calculating decision making ratios. They reduce risk for lenders and investors and enable owners, managers and consultants to increase Read More

Times Interest Earned Ratio

Formula to calculate times interest earned: Times Interest Earned Ratio = (net income + interest) / interest. Times interest earned definition and explanation: The times interest earned ratio indicates the extent of which earnings are available to meet interest payments. Read More

Contribution Margin and Contribution Margin Ratio

Formulas to calculate contribution margin and contribution margin ratio: Contribution Margin = sales – variable costs. Contribution Margin Ratio = (sales – variable costs)/sales. Contribution margin and contribution margin ratio definition and explanation: Contribution margin is the amount generated by Read More

Bad Debts Ratio

Formula to calculate bad debts ratio: Bad Debts Ratio = bad debts / accounts receivable. Bad debts ratio definition and explanation: The bad debts ratio is an overall measure of the possibility of the business incurring bad debts. The higher Read More

Average Inventory Period Ratio

Formula to calculate average inventory period: Average Inventory Period = (inventory x 365 days) / cost of sales. Average inventory period definition and explanation: The average inventory period is also referred to as Days Inventory and Inventory Holding Period. This Read More