We are looking at the word gross margin. Gross margin is a company’s total revenue minus by the COGS (cost of goods sold), divide by the total revenue, expressed as a percentage. The gross margin represents the percent of total revenues that a company retains after incurring direct costs associated with producing goods and services it sells.
The higher the percentage, the more the company retains, to service its other costs and debt obligations.
As a business owner, one of your greatest concerns that you face is whether or not your business is going to survive. Many businesses are in debt for a multiple of reasons: from starting a business, expanding a business, or developing a new product.
But how do you know, as a business owner, that you are solvent?
The solvency ratio is a means for a business owner can use to help them measure the business’ ability to meet its debt and other obligations. The solvency ratio indicates whether...
Liquidity! What is it? It is the ability of current assets to meet current liability when due. How does a business owner test they have enough liquidity? They will use what is called an acid test ratio. The ratio is found by dividing the most liquid current assets (cash, marketable securities, and account receivables) by current liabilities.
In general, the ratio should be equal to one or greater. In other words, for every $1.00 in current debt, there should be $1...