The Calculation of Contribution Margin Ratio for Service Companies Is

question 2

True/False

The calculation of contribution margin ratio for service companies is significantly different from that of manufacturing companies.

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Definitions:

Accounts Receivable

Amounts owed to a company by customers for products or services that have been delivered but not yet paid for.

Average Collection Period

A financial metric that calculates the average number of days it takes for a company to receive payments from its customers.

Net Sales

Income generated from sales once returns, allowances for damaged or missing items, and discounts have been subtracted.

Accounts Receivable

Represents the money owed to a business by its customers for goods or services delivered but not yet paid for.