Accounting Equation
Assets = Liabilities +Equity
Return On Assets (ROA)
Net income / Average total assets
Average total assets = (Beginning total assets + Ending total assets) / 2
Debt Ratio
Total liabilities / Total assets
Straight-Line Method
(Cost - Residual value) / Useful Life
Book Value
Depreciable asset’s cost - Accumulated depreciation
Interest
Principal x Interest rate x Time
Current Ratio
Total current assets / Total current liabilities
Gross Profit
Net Sales Revenue - Cost of Goods Sold
Net Cost of Inventory
Purchase Cost of Inventory - Purchase Returns and Allowances - Purchase Discount + Freight In
Operating Income
Gross Profit - Operating Expenses
Gross Profit Percentage
Gross Profit / Net Sales Revenue
Ending Merchandise Inventory
Number of Units On Hand x Unit Cost
Cost Of Goods Sold
Number of Units Sold x Unit Cost
Weighted-Average Cost Per Unit
Cost of Goods Available For Sale / Number of Units Available
Inventory Turnover
Cost of Goods Sold / Average Merchandise Inventory
Average Merchandise Inventory
(Beginning Merchandise Inventory + Ending Merchandise Inventory) / 2
Days’ Sales in Inventory
365 Days / Inventory Turnover
Cash Ratio
(Cash + Cash Equivalents) / Total Current Liabilities
Percent-of-Sales Method
Net Credit Sale x % = Bad Debts Expense
Percent-of-Receivables Method
Target Balance = Ending balance of accounts receivable x %
Bad Debts Expense = Target balance - Unadj. credit balance of Allowance for Bad Debts
Or
Bad Debts Expense = Target balance + Unadj. debit balance of Allowance for Bad Debts
Aging-of-Receivables Method
Bad Debts Expense = Target balance - Unadj. credit balance of Allowance for Bad Debts
Or
Bad Debts Expense = Target balance + Unadj. debit balance of Allowance for Bad Debts
Acid-Test Ratio
(Cash including cash equivalents + Short-term investments + Net current receivables) / Total current liabilities
Accounts Receivable Turnover Ratio
Net credit sales / Average net accounts receivable
Days’ Sales in Receivables
365 Days / Accounts receivable turnover ratio