acconting, non current assets/indicators

verifability

finance information is faithful and free from bias and errror

revelance

Information that is useful for making a decision must be included

Return on Assets (ROA)

Assess how effectively the business has used its assets to earn profit

ROI evaluation

For every $1 of average capital the business has generated $x of profit

Return on Owner’s investment

showing how efficiently the owner is using it’s capital to earn profit (measures profit earned per capital invested by owner)

ROI formular

Net profit/average capital x 100

ROA formular

Net profit/average total assets x 100

Working capital ratio (WCR)

measure the ability of the business to use its current assets to pay the current liabilities

WCR formular

current assets/current liability : 1

WCR evaluation

the business has $x of current assets for every $1 of current liability

iventory turnover (ITO)

how many days on average does the business take to convert inventory into sales

ITO formular

Average inventory/cost of goods sold x 365

ITO evaluation

in 20.. the business took x days to sell it’s stock

Asset turnover

assess how productively a business has used its assets to earn revenue

Asset turnover formular

Net sales/average assets

Assest turnover evaluation

sales revenue has x times the amount of its assets

ROA evaluation

for every $1 of assets owned, the business generated $x of profit

carrying value

value of a non current asset that is yet to be consumed as an expense

residual value

amount left over after the depreciation has been consumed

accumlated deprecation

value of a nca that has been consumed over it’s useful life so far

Depreciation formular

Historical cost - residual value/ useful life

rate of depreciation

depreciation expense/historical cost x 100