This formula is the root of accounting.Worth = Assets – Liabilities
Sum of assets that will convert into cash in less than 12 months.Current Assets = Cash + Accounts Receivable + Inventory + Prepaid Expenses
Book value of fixed assets.Net Fixed Assets = Fixed Assets at cost – Accumulated Depreciation
The sum of all assets.Total Assets = Current Assets + Other Assets + Net Fixed Assets
Bills due within 12 months of the Balance Sheet date.Current Liabilities = Accounts Payable + Accrued Expenses + Current Portion of Debt + Income Taxes Payable
The value of the company to its owners. Also called net worth.Shareholder’s Equity = Capital Stock + Retained Earnings
The total obligation plus worth of the entity.Total Liabilities and Equity = Current Liabilities + Long-Term Debt + Shareholders’ Equity
The left over amount after cost of goods sold are taken away from net sales.Gross Margin = Net Sales – Cost of Goods Sold Formula
The sum of expenses paid for developing and selling the product or service.Operating Expenses = Sales & Marketing + Research & Development + General & Administrative
Net profit from the product or services sold.Income From Operations = Gross Margin – Operating Expenses
Net income is all income minus total expenses and costs.Net Income = Income From Operations + Interest Income – Income Taxes
A liquidity ratio that asks can the current assets pay the current liabilities? If the current ratio is greater than or equal to 1.0, then the answer is yes.
Current Ratio = | Current Assets |
Current Liabilities |
Shows how much cash you currently have on hand. It also demonstrates how well your business can pay off its current liabilities. The higher the number, the healthier your company.
Cash Ratio = | Cash |
Current Liabilities |
A liquidity ratio showing if there is enough cash and receivables to pay the bills due in 12 months
Quick Ratio = | (Cash + Accounts Receivable) |
Current Liabilities |
How well a unit is using its assets to make sales.
Asset Turn Ratio = | Net Sales |
Total Assets |
How long does it take on average to get paid for a product sold?
Receivable Days = | 365(Accounts Receivable) |
Net Sales |
Measures how fast one is using the inventory
Inventory Turn = | Cost of Goods |
Inventory |
How well management is doing at using the assets to make a profit.
Return on Assets (ROA) = | Net Income |
Total Assets |
How well management is using money invested by shareholders.
Return on Investment (ROI) = | Net Income |
Shareholders Equity |
Determines the profit margin of a company.
Return on Sales (ROS) = | Net Income |
Net Sales |
Percentage of profit over the cost of goods.
Gross Margin = | (Net Sales - Cost of Goods) |
Net Sales |
Measures if a company has more debt than equity. Checks if a company will be able to repay a loan out of their equity
Debt-to-Equity Ratio (DTE) = | (Current Debt + Long-Term Debt) |
Shareholders Equity |
Compares debt to assets
Debt Ratio = | (Current Debt + Long-Term Debt) |
Total Assets |
Tells you how much you need to sell to cover all of your costs and generate a profit of $0Break-even point = sales – fixed costs – variable costs