Report Analysis - How to Read the Statements

Inventory Turnover Rate

One of the many ratios used in business, the inventory turnover rate is often misunderstood, miscalculated and misused.  The traditional business course in academia explains that ideally the inventory turnover ratio (rate) is the highest […]

Accounting Concepts and Principles

Cost of Sales – Various Formats

Many business owners misunderstand the use of term ‘Cost of Sales’ by restricting it to just simply ‘Cost of Goods Sold’.  Basically, most business entrepreneurs and even accountants don’t realize that it has several different […]

Variable Costs
Terminology

Variable Costs

Variable costs are those business related expenditures that vary in proportion to production.  The most common examples of variable costs include raw materials, labor, packaging and distribution expenses related to producing and delivering the product […]

Accounting Systems and Technology

Chart of Accounts – Layout

The goal of accounting is to record the economic activity of the business.  This is achieved by entering each economic transaction into a set of books.  The books are formatted to reflect the balance sheet […]

Accounting Concepts and Principles

Definition of Contribution Margin

Contribution margin is a core business concept and is often used in cost accounting to identify the amount of financial contribution a sold product provides to the company.  Simply put, contribution margin is the sales […]