Gross Profit Margin Ratio
Your gross profit margin can be calculated with the following formula, using figures taken from your income statement: Recall that gross profit is the amount…
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Net Profit Margin
Your net profit margin shows you the bottom line: how much of each sales dollar is ultimately available for you, the owner, to draw out…
Operating Profit Percentage
The operating profit percentage can be calculated using the following formula, with figures taken from your income statement: This ratio is designed to give you…
Return on Assets
Return on assets is the ratio of net income to total assets. It is basically a measure of how well your business is using its…
Return on Equity
The return on equity ratio can be calculated using the following formula: The ratio of net income (from the income statement) to net worth or…
The Three Elements of Cost
We first classify costs according to the three elements of cost: materials labour expenses
Comparison of financial and management accounting
There are two broad types of accounting information: Financial Accounting: geared toward external users of accounting information Management Accounting: aimed more at internal users of…
Management accounting’s role in business management
Management accounting systems help to decide who has the decision-making authority over company assets. Accounting information produced or created from the management accounting system supports…
Product and Period Costs
We also classify costs as either Product costs: the costs of manufacturing our products; or Period costs: these are the costs other than product costs…
The classification of Product Costs
Direct costs Direct costs are generally seen to be variable costs and they are called direct costs because they are directly associated with manufacturing. A…