Accounting Formulas

Accounting Equation

Assets = Liabilities + Equity

Gross Profit

Sales - COGS

Net Profit

Revenue - Total Expenses

Gross Profit Margin

(Gross Profit / Sales) x 100

Net Profit Margin

(Net Profit / Sales) x 100

Current Ratio

Current Assets / Current Liabilities

Quick Ratio

(Current Assets - Inventory) / Current Liabilities

Working Capital

Current Assets - Current Liabilities

Debt-To-Equity Ratio

Total Liabilities / Equity

Debt Ratio

Total Liabilities / Total Assets

Average Total Assets

(Beginning Total Assets + Ending Total Assets) / 2

Return on Assets (ROA)

(Net Profit / Average Total Assets) x 100

Average Equity

(Beginning Equity + Ending Equity) / 2

Return on Equity (ROE)

(Net Profit / Average Equity) x 100

Average Inventory

(Beginning Inventory + Ending Inventory) / 2

Average Accounts Receivable

(Beginning A/R + Ending A/R) / 2

Average Accounts Payable

(Beginning A/P + Ending A/P) / 2

Inventory Turnover

COGS / Average Inventory

Receivables Turnover

Credit Sales / Average Accounts Receivable

Days Sales Outstanding (DSO)

(Average Accounts Receivable / Revenue) x 365

Payables Turnover

Credit Purchases / Average Accounts Payable

Days Payable Outstanding (DPO)

(Average Accounts Payable / COGS) x 365

Earnings Per Share (EPS)

(Net Profit - Preference Dividends) / Number of Ordinary Shares

Break-Even Point (Units)

Fixed Costs / Contribution per Unit

Contribution per Unit

Selling Price per Unit - Variable Cost per Unit

Contribution Margin

(Contribution / Sales) x 100

Margin of Safety

Actual Sales - Break-Even Sales

Straight-Line Depreciation

(Cost - Residual Value) / Useful Life

Carrying Amount

Cost - Accumulated Depreciation

Markup

(Profit / Cost) x 100

Return on Investment (ROI)

(Net Profit / Investment) x 100

Asset Turnover

(Sales / Average Total Assets)

Operating Profit

Gross Profit - Operating Expense

Cash Conversion Cycle

Inventory Days + Receivable Days - Payable Days

Present Value

Future Value / (1+ Interest Rate)^period

Future Value

Present Value x (1 x Interest Rate)^period

Days Sales Uncollected (DSU)

(Accounts Receivable / Net Sales) x 365