If a company sells on credit to customers and there are no terms for the credit sale, it means that the customers can pay the debt anytime they choose — which may be never. The average collection period is a metric that measures a company’s efficiency in converting sales on credit into cash on hand. […]
As the item is being manufactured, the component piece’s price must be directly traced to the item. Direct costs do not need to be fixed in nature, as their unit cost may change over time or depending on the quantity being utilized. An example is the salary of a supervisor that worked on a single […]
Direct costs are any costs that vary directly with revenues, such as the cost of materials and commissions. For example, if a business has revenues of $1,000 and direct costs of $800, then it has a residual amount of $200 that can be contributed to the payment of fixed costs. This $200 amount is the […]
The percentage of sales method assumes that the company cannot collect payment for a fixed percentage of goods or services that it has sold. The sales returns account contains either an allowance for returned goods, or the actual amount of revenue deduction attributable to returned goods. It is especially important to track sales returns ...
In contrast, the actual value of the CV is independent of the unit in which the measurement has been taken, so it is a dimensionless number. For comparison between data sets with different units or widely different means, one should use the coefficient of variation instead of the standard deviation. In many scenarios, coefficients are […]
The chief financial officer is a member of the C-suite, a term used to describe the most important executives in a company. Alongside the CFO, these roles include the chief executive officer (CEO), the chief operating officer (COO), and the chief information officer (CIO). Access to timely, accurate data is a key enabler to finance […]