Finance Formulas / July 13, 2018 / Luz Tyson
The contribution margin is an integral aspect when calculating the break-even point of sales or a target level of sales. The contribution margin determines the portion of each sale that is attributed to covering fixed costs. For this reason, fixed costs divided by the contribution margin results in the number of units needed to be sold to break-even. To find a target net income, the target amount is added to total fixed costs.
Total debt service refers to current debt obligations, meaning any interest, principal, sinking-fund and lease payments that are due in the coming year. On a balance sheet, this will include short-term debt and the current portion of long-term debt.
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