Accounting Final Formulas

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11 Terms

1

Residual Income (RI)

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

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2

Return on Investment (ROI)

Operating Income / Avg Total Assets

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3

Profit Margin

Operating Income / Net sales

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4

Asset Turnover Ratio

Net Sales / Avg Total Assets

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5

Payback

Initial Investments / Annual Net Cash Inflows

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6

ARR

Avg Annual Operating Income / Avg Amount Invested

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7

Avg Annual Operating Income

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

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8

NPV

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

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9

Profitability Index (PI)

PV of Future Cash Flows / Initial investment

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10

Internal Rate of Return (IRR)

Initial Investment / Annual Net Cash Inflow

Find percentage year fall betweens

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11

Avg Amount Invested

(Cost + Residual Value) / 2

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