The Contribution Margin Is Calculated By

question 48

Multiple Choice

The contribution margin is calculated by:

• A)Subtracting fixed costs from sales.
• B)Subtracting variable costs from sales.
• C)Subtracting fixed and variable costs from sales.
• D)Subtracting common costs from sales.

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Definitions:

Internal Growth Rate

The internal growth rate is the maximum rate at which a company can expand its operations through reinvestment of its own earnings, without raising external financing.

Dividend Payout Ratio

The percentage of a company's net earnings distributed to its shareholders as dividends.

Fixed Assets

Long-term tangible assets used in the operation of a business that are not expected to be consumed or converted into cash within a year.

Operating Capacity

Operating capacity refers to the maximum output that a company can produce using its available resources, under given conditions, over a certain period.