CONTRIBUTION MARGIN ANALYSIS Definition

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CONTRIBUTION MARGIN ANALYSIS is a technique used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio. The manager asks what will happen to profits if a new product is added or an existing product is discontinued. Calculations take into account additional revenues, additional costs, effects on other products in the portfolio (referred to as cannibalization), and competitors reactions.

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BUSINESS UNIT is equivalent to a wholly owned subsidiary except that it is not treated as a separate legal entity. It is an organization within a firm that could operate separately because it has all support functions contained within the business unit. The internal financial reporting from a business unit to the corporate office is basically identical to a separate legal entity.

DIVIDEND YIELD is the annual rate of return, expressed as a percentage, on an investment.

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