What Is the Formula for Calculating Contribution Margin Ratio

question 39

Multiple Choice

What is the formula for calculating contribution margin ratio?

• A) Contribution margin ÷ Net income
• B) Contribution margin ÷ Fixed costs
• C) Contribution margin ÷ Desired profit
• D) Contribution margin ÷ Sales

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Definitions:

Interest Tax Shield

The reduction in income taxes that results from the deduction of interest payments on debt from taxable income.

Unlevered

Pertaining to a business or investment that does not involve borrowing, thereby not subject to the risks and rewards of leverage.

Tax Loss Carry Forward

A tax rule allowing businesses or individuals to use a net loss in one period to offset a profit in future periods for taxation purposes.

Interest Tax Shield

The reduction in income taxes that results from the deductible nature of interest payments on debt.