Ratios and equations ACC201

earnings per share

(net income - preferred dividends) / weighted average common shares outstanding

current ratio (liquidity)

Current Assets /Current Liabilities

working capital (liquidity)

current assets - current liabilities

debt to assets (solvency)

total liabilities/total assets

Multi-Step Income Statement

revenues-COGS=gross income-operating expenses=net income

multi-step under periodic system

Beginning inventory-cost of goods purchased=cost of goods available for sale-ending investory=COGS

gross profit rate (profitability)

gross profit/net sales

profit margin (profitability)

net income/net sales

inventory turnover (liquidity)

COGS/average inventory

days in inventory (liquidity)

365/inventory turnover

average inventory

(Beginning Inventory + Ending Inventory) / 2

interest

face value x annual rate x time in year

net book value

cost - accumulated depreciation

Annual Deprication

(historic cost-salvage value)/useful life

Return on Assets (Profitability)

net income/average total assets

Assets Turnover (profitability)

net sales/average total assets

times interest earned (solvency)

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

outstanding shares

shares issued-treasury stock

payout ratio (profitability)

cash dividends declared on common stock/net income

Return on common stockholders' equity (profitability)

(net income-preferred dividends)/average common stockholders' equity

free cash flow (solvency)

net cash provided by operating activities-capital expenditures-cash dividends paid

sales

total receipts/ (100% + sales tax %)

multi-step under perpetual

Beginning inventory-cost of goods purchased=cost of goods available for sale-COGS=ending inventory

cost of purchases

purchases - returns & allowances - discounts = net purchases + freight in = cost of purchases

accounts receivable turnover (liquidity)

Net Credit Sales/Avg. Net Accounts Receivable

average collection period (liquidity)

365/accounts receivable turnover

retained earnings ending balance

retained earnings begining balance + net income - dividends

dividend

$ per share x # of shares

annual dividend

# of shares x par value x %

Per Bank Statement Adjustments

+ deposits in transit

- outstanding checks

+/- bank errors

per book statement adjustments

+ EFT checks & other deposits

- NSF checks

- service charges & other payments

+/- bank errors

carrying value

face value + premium (or - discount)