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|
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|
A liquidity ratio showing if there is enough cash and receivables to pay the bills due in 12 months
|Quick Ratio =||(Cash + Accounts Receivable)|
How well a unit is using its assets to make sales.
|Asset Turn Ratio =||Net Sales|
How long does it take on average to get paid for a product sold?
|Receivable Days =||365(Accounts Receivable)|
Measures how fast one is using the inventory
|Inventory Turn =||Cost of Goods|
How well management is doing at using the assets to make a profit.
|Return on Assets (ROA) =||Net Income|
How well management is using money invested by shareholders.
|Return on Investment (ROI) =||Net Income|
Determines the profit margin of a company.
|Return on Sales (ROS) =||Net Income|
Percentage of profit over the cost of goods.
|Gross Margin =||(Net Sales - Cost of Goods)|
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)|
Compares debt to assets
|Debt Ratio =||(Current Debt + Long-Term Debt)|
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