Accounting: Equations (Final Exams)

Net Sales (Returns)

Net Sales = Sales Revenue - Sales Returns (# returned * Unit Price)

Net Sales (Allowance)

Net Sales = Sales Revenue - Sales Allowance (Sales * Allowance%)

Bad Debt Expense

Total Credit Sales x Bad Debt

Allowance for Doubtful Accounts Equation

BB + Bad Debt Expense - Write-offs = EB

Net Accounts Receivable

Gross Accounts Receivable - Allowance for Doubtful Accounts

Gross Accounts Receivable Equation

BB + Net Credit Sales - Cash Collections - Write-offs = EB

Average Receivables Turnover

Net Sales / Average Accounts Receivable

Average Collection Period

365 / Average Receivables Turnover

Inventory Turnover Ratio

Cost of Goods Sold / Average Inventory

Average Days to Sell

365 / (Inventory Turnover Ratio)

Straight-line Method Equation

Depreciation Expense = (Cost - Residual Value) / Useful Life

Declining-Balance Equation

Depreciation Expense = ((Cost - Accumulated Depreciation) / Useful Life) x Rate

Units-of-Production Equation

Depreciation Expense = ((Cost - Residual Value) / Estimated total Production or Usage) x Actual Production or Usage

Impairment Loss

Net book value - Fair value

Disposal of Fixed Assets Equation

Gain/Loss = Amounts received from disposal - net book value

Fixed Asset Turnover

Net Sales / Average Fixed Assets

Accounts Payable Turnover

Cost of Goods Sold / Average Accounts Payable

Average Days to Pay

365 / A/P Turnover

 Bond Discount (Issued at Discount)

Discount = Face Value - PV of the Bond

Bond Discount (Issued at Premium)

Discount = PV of the Bond -  Face Value

Annual Cash Interest Payment

Cash Interest Payment = Face Value x Coupon Rate

Interest Expense

Beginning Book Value x Market Rate

Discount Amortization

Interest Expense - Cash Interest Payment

Ending Book Value

Beginning Book Value + Discount Amortization

Times Interest Earned

(Net Income + Interest Expense + Income Tax Expense) / Interest Expense

Debt-to-Equity

Total Liabilities / Total Stockholders’ Equity

Earnings per Share (EPS)

(Net Income - Preferred Stock Dividends) / (Weighted Average of Common Stock Outstanding)

Earnings per Share (EPS)

Net Income / # of Equity Shares

Dividend Yield

Dividends per Share / Market Price per Share

Common Stock

# of Issued Common Shares * Par Value per Common Share

Preferred Stock

Number of Issued Preferred Shares * Par Value per Preferred Share

APIC

Number of issued shares * (Market price per share – Par value per share)

Retained Earnings

Beginning R/E + Net Income – Dividends

Treasury Stock

Number of repurchased shares * repurchase price per share

Outstanding Shares

 Issued Shares – Treasury Shares

Preferred Dividends

 Dividend rate * Par value per share * Number of issued shares

Quality of Income

Cash Flow from Operating Activities / Net Income

Capital Acquisition

Cash Flow from Operating Activities / Cash Paid for PPE

PV of Single Sum

Future Value * 1 / (1 + i)^t

PV of Ordinary Annuity

Payment * [1 - 1 / (1 + i)^t] / t