A-100 Formula Sheet

1. Income Statement Equation: (Revenues - Expenses = Net Income) 

Sales 

- Cost of goods sold 

= Gross profit 

- Operating expenses

= Net income from operations 

+/- Gain/Loss on sale of assets 

= Net income

2. Statement of Retained Earnings:

Beginning retained earnings (0 if company is in yr 1 of operations)

+ Net income 

- Dividends paid 

= Ending retained earnings

3. Balance Sheet/Accounting Equation:

 Total Assets = Total Liabilities + Total Stockholders’ Equity

• Total Stockholders’ Equity = Common Stock and Retained earnings (Ending Balance) 

4. Cash Flow Statement: 

Beginning Cash balance 

+/-Net Cash Flows from Operating Activities 

+/-Net Cash Flows from Investing Activities 

+/-Net Cash Flows from Financing Activities 

= Ending Cash Balance 

5. Tax Calculations: 

Gross Income recognized for tax purposes

- Deductions 

= Taxable Income (T.I.) 

× Flat Tax rate of 21% 

= Regular income tax liability before credits 

− Credits and Prepayments (Credits like green initiative tax credits, etc.)

= Total Tax Liability (AKA Tax Expense or Federal Income tax)

6. Taxable Income (T.I.)  

- Tax Expense 

= Net Income/Loss after tax 

7. Financial Ratios 

• Profitability Ratio: 

Return on equity = Net Income / Average Stockholders’ Equity 

[Average Stockholders Equity or Inventory = (This year + Last Year )/2 ] 

• Leverage Ratio: 

Debt to equity = Total Liabilities / Total Stockholders’ Equity

• Solvency Ratio: 

Current Ratio = Current Assets / Current Liabilities

• Asset Turnover Ratio: 

Inventory Turnover = Cost of Goods Sold / Average Inventory

• Earnings Per Share Ratio = Net Income / Number of Shares Outstanding