Accounting Changes and Error Corrections: Definitions and Retrospective vs. Prospective

Change in Accounting Entity

Retrospective

Change in Accounting Estimate

Prospective

Change in Accounting Principle

Retrospective

Correction of an error

Restatement of prior periods

Gross Profit Ratio

Sales - COGS/ Sales

Profit Margin Ratio

Net Income/ Sales

Return on Sales

Income before Interest (revenue and expenses) and Taxes / Sales

Return on Asset

Net Income / Average Total Assets

Dupont Return on Asset

Profit Margin Ratio x Asset Turnover

Return on Equity

Net Income - Preferred Dividends/ Average Total Equity

Operating Profit Margin

Cash Flow from Operations / Current Liabilities

Current Ratio

Current Assets/ Current Liabilities

Quick Ratio

Cash+ Equivalents + Short Term Marketable Securities + Receivables/ Current Liabilities

A/R turnover

Sales / Average A/R

Inventory Turnover

COGS/ Average Inventory

Days in A/R

Ending A/R/ (Sales/365)

Days in Inventory

Ending Inventory / (COGS/365)

A/P Turnover

COGS/ Average A/P

Days in Payables Outstanding

Ending A/P / (COGS / 365)

Cash Conversion Cycle

Days in Inventory + Days in Receivables - Days Payables Outstanding

Debt to Equity

Total Liabilities/ Total Equity

Total Debt Ratio

Total Liabilities/ Total Assets

Equity Multiplier

Total Assets/Total Equity

Times Interest Earned

Income before interest expense and taxes/ interest expense

EBITDA

Earnings before interest, taxes, depreciation, and amortization

Earnings per Share

Income Available to Common Shareholders/ Weighted Average Shares Outstanding

Price to Earnings Ratio

Price per Share/ Earnings per Share

Dividend Payout Ratio

Cash Dividend/ Net Income

Asset Turnover

Sales/ Average Total Assets

Net Realizable Value

Selling costs - cost of disposal

Market Ceiling

NRV

Market Floor

NRV - profit margin

Regulation S-X

Content and form for interim and annual financial statements

Regulation S-K

non-financial reporting requirements for SEC filings for public companies

Regulation S-T

rules for governing electronic filings

Regulations S-B

disclosure requirements for small business issuers