ECONOMETRICS Definition

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ECONOMETRICS literally means economic measurement. It is the branch of economics that applies statistical methods to the empirical study of economic theories and relationships. It is a combination of mathematical economics, statistics, economic statistics and economic theory.

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CONTRIBUTION/SALES RATIO (C/S RATIO) is a tool used in profit management. It is important to establish the C/S RATIO: C/S ratio = (Sales revenue - Variable cost of sales)/Sales revenue x 100. If a company achieves a high average marginal profit ratio of say, 40%, it does not mean that it will achieve high profits. The eventual profit will be dependent on the level of fixed costs within the organization.

BUDGETARY DEFICIT occurs when expenditures are greater than revenues.

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