DEBT SERVICE COVERAGE Definition

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DEBT SERVICE COVERAGE is the ratio of cash flow available to pay for debt to the total amount of debt payments to be made (interest and principal payments).

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CONTRIBUTION MARGIN PER UNIT, also known as dollar contribution margin per unit, is the selling price per unit minus the variable cost per unit. The "contribution" represents that portion of sales revenue that is not consumed by variable cost, thereby contributing to the coverage of fixed cost.

 

ACCOUNTING CYCLE is the sequence of steps in preparing the financial statements for a given period. It refers to the fact that because financial reports are given each period (usually a year) there are a set of steps (cycle) taken each period that result in the reports and preparation for the next period or cycle. The term cycle is used because every period there is a start and an end. The cycle usually starts with the budget, goes through the journal entries, adjusting entries, posting to the accounts, financial reports, and closings.

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