# Operating Ratio Formula

Finance Formulas / July 21, 2018 / Rory Wise

There are many 3 letter acronyms in digital advertising calculations. To be a master of the programmatic ecosystem, you need to know them all and when to use each calculation! Clicks and engagement are what drive the online advertising model. Understanding the calculations behind clicks is essential for your knowledge base.

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As mentioned above, the CAC metric is important to two parties companies and investors. The first party includes outside, early stage investors who use it to analyze the scalability of new Internet technology companies. They can determine a company’s profitability by looking at the difference between how much money can be extracted from customers and the costs of extracting it.

Contribution margin is directly related to the contribution margin ratio. The contribution margin ratio can be calculated on a per-unit basis or an aggregate basis. The per-unit basis divides the contribution margin per unit by the unit sale price, while the total contribution margin ratio divides the total contribution margin by the total revenue. The figure will result in a percentage that indicates what percentage of each dollar of revenue is generated to cover fixed costs.

The statement of cash flows or the cash flow statement, as it's commonly referred to, is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.

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