Accounting Final Formulas

Residual Income (RI)

Operating Income - (Target Rate of Return x Avg Total Assets)

Return on Investment (ROI)

Operating Income / Avg Total Assets

Profit Margin

Operating Income / Net sales

Asset Turnover Ratio

Net Sales / Avg Total Assets

Payback

Initial Investments / Annual Net Cash Inflows

ARR

Avg Annual Operating Income / Avg Amount Invested

Avg Annual Operating Income

(Annual Net Cash Inflows x Life) - (Cost - Residual Value) / Life

NPV

Future Cash Flows x PV Factors= PV of Future Cash Flows - Initial Investment

Profitability Index (PI)

PV of Future Cash Flows / Initial investment

Internal Rate of Return (IRR)

Initial Investment / Annual Net Cash Inflow

Find percentage year fall betweens

Avg Amount Invested

(Cost + Residual Value) / 2