Explain How to Calculate Contribution Margin Per Unit

question 52

Essay

Explain how to calculate contribution margin per unit.

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Definitions:

Common Share

Equity ownership in a company, providing voting rights and entitling the shareholder to a share of the company's success through dividends and/or capital appreciation.

Dual-Class Shares

Sometimes created by a firm to meet special needs and circumstances. Generally, when special classifications of stock are used, one type is designated “Class A,” another as “Class B,” and so on. For example, Class A might be entitled to receive dividends before dividends can be paid on Class B stock. Class B might have the exclusive right to vote.

Voting Control

The power held by a shareholder or group of shareholders who possess a sufficient number of voting shares to influence or direct the management and decisions of a company.

Constant Growth DCF Model

A method of valuing a company using the theory that its stock is worth the sum of all its future cash flows, discounted back to their present value at a constant growth rate.