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Finance Formulas / July 19, 2018 / Cecelia Weiss

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.

Accounting ratios, also known as financial ratios, are used to measure the efficiency and profitability of a company based on its financial reports. They provide a way of expressing the relationship between one accounting data point to another, and are the basis of ratio analysis.

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