Accounting Ratios/Formulas

Mostly important formulas to know in Accounting

Working Capital

Current Assets - Current Liabilities

Current Ratio

Current Assets / Current Liabilities

Inventory Turnover

COGS / Average Inventory

Days in Inventory

365 days / Inventory Turnover

Accounts Receivable Turnover

Net Credit Sales / Average Net AR

Average Collection Period

365 Days / AR Turnover

Debt to Assets Ratio

Total Liabilities / Total Assets

Times Intererst Earned

Net Income + Interest Expense + Income Tax Expense / Interest Expense

Free Cash Flow

Net Cash provided by operating activities - Capital Expenditures - Cash Dividends

Earnings Per Share

Net Income - Preferred Dividends / Weighted Average Common Shares Outstanding

Price-Earnings Ratio

Market Price per Share / Earnings Per Share

Gross Profit Rate

Gross Profit / Net Sales

Gross Profit

Revenue - COGS

Profit Margin

Net Income / Net Sales

Return on Assets

Net Income / Average Total Assets

Asset Turnover

Net Sales / Average Total Assets

Payout Ratio

Cash Dividends declared on Common Stock / Net Income

Return on Stockholder’s Equity

(Net Income / Average Stockholders Equity) x 100

Direct Materials Used

Beginning Materials + Materials Purchases - Ending Materials