 # Accounting Formulas

## Accounting Equation:

This formula is the root of accounting.
Worth = Assets – Liabilities

## Current Assets:

Sum of assets that will convert into cash in less than 12 months.
Current Assets = Cash + Accounts Receivable + Inventory + Prepaid Expenses

## Net Fixed Assets:

Book value of fixed assets.
Net Fixed Assets = Fixed Assets at cost – Accumulated Depreciation

## Total Assets

The sum of all assets.
Total Assets = Current Assets + Other Assets + Net Fixed Assets

## Current Liabilities

Bills due within 12 months of the Balance Sheet date.
Current Liabilities = Accounts Payable + Accrued Expenses + Current Portion of Debt + Income Taxes Payable

## Shareholder’s Equity

The value of the company to its owners. Also called net worth.
Shareholder’s Equity = Capital Stock + Retained Earnings

## Total Liabilities and Equity

The total obligation plus worth of the entity.
Total Liabilities and Equity = Current Liabilities + Long-Term Debt + Shareholders’ Equity

## Gross Margin

The left over amount after cost of goods sold are taken away from net sales.
Gross Margin = Net Sales – Cost of Goods Sold Formula

## Operating Expenses

The sum of expenses paid for developing and selling the product or service.
Operating Expenses = Sales & Marketing + Research & Development + General & Administrative

## Income From Operations

Net profit from the product or services sold.
Income From Operations = Gross Margin – Operating Expenses

## Net Income

Net income is all income minus total expenses and costs.
Net Income = Income From Operations + Interest Income – Income Taxes

## Current Ratio

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

## Cash Ratio

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

## Quick Ratio

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

## Asset Turn Ratio

How well a unit is using its assets to make sales.
 Asset Turn Ratio  = Net Sales Total Assets

## Receivable Days

How long does it take on average to get paid for a product sold?
 Receivable Days  = 365(Accounts Receivable) Net Sales

## Inventory Turn

Measures how fast one is using the inventory
 Inventory Turn  = Cost of Goods Inventory

## Return on Assets (ROA)

How well management is doing at using the assets to make a profit.
 Return on Assets (ROA)  = Net Income Total Assets

## Return on Investment (ROI)

How well management is using money invested by shareholders.
 Return on Investment (ROI)  = Net Income Shareholders Equity

## Return on Sales (ROS)

Determines the profit margin of a company.
 Return on Sales (ROS)  = Net Income Net Sales

## Gross Margin

Percentage of profit over the cost of goods.
 Gross Margin  = (Net Sales - Cost of Goods) Net Sales

## Debt-to-Equity Ratio (DTE)

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

## Debt Ratio

Compares debt to assets
 Debt Ratio  = (Current Debt + Long-Term Debt) Total Assets

## Break Even Point

Tells you how much you need to sell to cover all of your costs and generate a profit of \$0
Break-even point = sales – fixed costs – variable costs

### What 24 formulas are used for the Accounting Formulas Calculator?

Assets = Liabilities + Equity
Current Assets = Cash + Accounts Receivable + Inventory + Prepaid Expenses
Net Fixed Assets = Fixed Assets at cost - Accumulated Depreciation
Total Assets = Current Assets + Other Assets + Net Fixed Assets
Current Liabilities = Accounts Payable + Accrued Expenses + Current Portion of Debt + Income Taxes Payable
Shareholders Equity = Capital Stock + Retained Earnings
Total Liabilities and Equity = Current Liabilities + Long-Term Debt + Shareholders Equity
Gross Margin = Net Sales - Cost of Goods Sold Formula
Operating Expenses = Sales & Marketing + Research and Development + General & Administrative
Income From Operations = Gross Margin - Operating Expenses
Net Income = Income From Operations + Interest Income - Income Taxes
Current Ratio = Current Assets/Current Liabilities
Cash Ratio = Cash/Current Liabilities
Quick Ratio = (Cash + Accounts Receivable)/Current Liabilities
Asset Turn Ratio = Net Sales/Total Assets
Receivable Days = 365(Accounts Receivable)/Net Sales
Inventory Turn = Cost of Goods/Inventory
Return on Assets (ROA) = Net Income/Total Assets
Return on Investment (ROI) = Net Income/Shareholders Equity
Return on Sales (ROS) = Net Income/Net Sales
Gross Margin = (Net Sales - Cost of Goods)/Net Sales
Debt-to-Equity Ratio (DTE) = (Current Debt + Long-Term Debt)/Shareholders Equity
Debt Ratio = (Current Debt + Long-Term Debt)/Total Assets
Break-even point = sales - fixed costs - variable costs

For more math formulas, check out our Formula Dossier

### What 6 concepts are covered in the Accounting Formulas Calculator?

accounting
measurement and communication of financial information
asset
Resources of value in accounting. Land, Equipment, Cash are examples
formula
a fact or a rule written with mathematical symbols. A concise way of expressing information symbolically.
liability
an obligation of a company that results in the companys future sacrifices of economic benefits to other entities or businesses
liquidity
ratio
indicates how many times one number contains another