accounting exam #2

Gross profit percentage

Gross profit on sales / Net sales

Return on sales

Net income / Net sales

Asset turnover

Net sales / Average total assets

Return on assets

Net income / Average total assets

Return on equity

Net income / Average stockholders equity

Working capital

Current assets - Current liabilities

Current ratio

Current assets / Current liabilities

Quick ratio

(Cash + Short-term involvements + Accounts receivable) / Current liabilities

Operating-cash-flow-to-current-liabilities ratio

Cash flow from operating activities / Average current liabilities

Accounts receivable turnover

Net sales / Average accounts receivable

Average collection period

365 / Accounts receivable turnover

Inventory turnover

Cost of goods sold / Average inventory

Days’ sales in inventory

365 / Inventory turnover

Debt-to-equity ratio

Total liabilities / Total stockholders’ equity

Times-interest-earned ratio

Income before interest expense and income taxes / Interest expense

Operating-cash-flow-to-capital-expenditures ratio

Cash flow from operating activities / Annual net capital expenditures

Earnings per share

(Net income - Stock dividends) / Weighted-average number of common shares outstanding

Price-earnings ratio

Market price per share / Earnings per share

Dividend yield

Annual dividend per share / Market price per share

Dividend payout ratio

Annual dividend per share / Earnings per share

Straight-line depreciation rate

100% / Expected useful life in years

Double-declining balance depreciation rate

(100% / Expected useful life in years) x 2

Annual depreciation

Book value at beginning of year x Double-declining balance rate

Book value

Acquisition cost - accumulated depreciation

Depreciation per unit

(Acquisition cost - Salvage value) / Total estimated units of production

Annual depreciation

Depreciation per unit x Units of production for the period

Impairment loss

Assets current book value - Current fair value

Depletion rate

(Cost of natural resource - Salvage) / Estimated total units of natural resource

Depreciation (Straight-line method)

(Asset cost - Salvage value) / Useful life

Interest

Principal x Rate x Time(days/360)

Gross profit

(Revenue - COGS) / Revenue