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Finance Formulas / July 17, 2018 / Kenley Hopper

Contribution margin is the sales price minus total variable costs, where variable costs might include materials, labor or overhead. For example, Company XYZ sells a product for $100 each. The company incurs a unit variable direct material expense of $12, unit variable labor expense of $25, $10 of variable overhead per unit and $8 of fixed overhead per unit.

The debt-to-equity ratio is a measure of the relationship between the capital contributed by creditors and the capital contributed by shareholders. It also shows the extent to which shareholders' equity can fulfill a company's obligations to creditors in the event of a liquidation.

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