Finance Formulas / July 19, 2018 / Briana Leonard
Contribution margin is a cost accounting concept that lets a company determine the profitability of its individual products. The phrase contribution margin can also refer to a per unit measure of a product's gross operating margin. It's calculated as the product's sale price minus its total variable costs per unit. This metric helps a company evaluate different areas of the business to determine the profitability of each service or product.
Stockholders' equity is often referred to as the book value of the company, and it comes from two main sources. The first source is the money originally and subsequently invested in the company. The second source consists of the retained earnings the company accumulates over time through its operations. In most cases, especially when dealing with companies that have been in business for many years, retained earnings is the largest component.
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