Formula Sheet for Accounting PDF

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Summary

Complete formula sheet needed for accounting...

Description

Profitability Ratios – Measures operating success of an entity Name Return on Assets

Profit Margin Cash Returns on Sales Ratio

Formula

Profit ROA= Average total Assets Profit Net Sales Net Cash provided by Operating Activities CRSR= Net Sales Profit Margin=

Description Indicates amount of net profit generated by each dollar invested in assets. Higher = Better Measures % each sales dollar that results in profit. Higher = Better Ability of an entity to generate a Reasonable Return.

Liquidity Ratios – Measures short term ability to pay obligations and meet unexpected costs Working Capital

WC=Current Assets−Current Liabilities

Current Ratio

Current Ratio =

Current Cash Debt Coverage

CCDC =

Quick Ratio / Acid Test

QR=

Current Assets Current Liabilities

Net cash provided by Operating activities AverageCurrent Liabilities

Cash+Marketable securities+net recievables Current Liabilities

Solvency Ratios -

Measures ability of entity to survive over the long term

Debt to total Assets ratio

DTAR=

Cash Debt Coverage

CDC=

Times Interest Earned

TIE=

Total Liabilities Total Assets

Net cash provided by Operating Activities Average total Liability

Profit before Income tax+ Interest Expense Interest Expense

the capital of a business which is used in its day-to-day trading operations. Higher = Better. Positive means current assets meet current liabilities Measure ability to meet current obligations. Want to be in line with industry standards, not too high (management not using assets efficiently) or too low (may risk default). Above 1:1 means current assets exceed current liabilities (higher liquidity) Indicates the entity’s ability to generate sufficient cash to meet short term needs Focuses on assets that are quickly converted into cash. Higher ratio indicated a higher level of short term liquidity.

Measures % of assets financed by creditors rather than shareholders. Lower is better. % of entity’s assets are financed by debt Indicates entity’s ability to generate sufficient cash to meet long term needs ratio is a measure of a company's ability to meet its debt obligations based on its current income

Analysis of Inventory – How quick Inventory is sold Inventory Turnover

Inventory Turnover =

Days in Inventory

Days∈Inventory =

Cost of Sales Average Inventory

365 Inventory Tunrover

Unit = times. Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a given period Units = Days

Analysis and Managing Receivables A firm need to be careful who they lend credit to and do not want a risky customer, especially by extending its credit policy. The payment period should be consistent with that of the firms competitors. Allowance for Doubtful Debt Credit Risk Ratio Measures the risk that customers CRR= may not pay their accounts. Accounts Recievable Net Credit Sales Receivables Number of times per year on Recievables Turnover= Turnover average receivables are collected. Average Net Recievables Convert ‘times’ to days Average 365 ACP= Collection Period Recievables turnover

Depreciation Straight Line

Diminishing Balance

Straight=

Cost of Asset−Residual Value Useful lifeof Asset

Depreciation=1−

√ n

r 1 /n ∨1−( r /c ) c

This is a % value. Need to do Carrying amount * Depreciation Rate to find Actual depreciation expense Units of Production

Depreciable cost of Asset Useful Life of Asset Dep. Expense=DCPR∗YearlyUnits of Production Dep. cost per unit =

Depreciation amount the same every year. Calculates yearly depreciation amount N = Estimated Life R = Residual Value C = Cost Depreciation expense decreases each year as greater benefits are consumed earlier in assets life. Useful life is expressed in terms of total units of production or use expected from the asset.

PPE and Assets Average Useful Life

AUL=

Average age of PPE

A AA=

Asset Turnover

Average Cost of PPE Assets Depreciation Expense Accumulated Depreciation D epreciation Expense

Asset Tunrover=

Net Sales Average Total Asset

May highlight that depreciation calculation method not reasonable. Indication of the effectiveness of an asset. Older assets will need replacing sooner and less efficient A higher value indicates more efficient operations as they are generating more sales from each $1 invested in assets

Financial Statement Analysis Dividend Payout

Return on Ordinary Shareholders Equity

Cash dividends declared onOrdinary shares DP= Profit ROSE=

Profit−Preference Dividends Ordinary Shareholders averageequity

Measures % of Profit distributed in cash dividends to ordinary shareholders How many Dollars of profit were earned for each dollar invested by ordinary shareholders

Cash Flow Free Cash Flow

Capital Expenditure Ratio

FCF=Net Cash by Operating−Capital Expenditures describes cash from operations

CER=

Net Cash Provided By operating activities Capital Expenditures

available for expansion or payment of dividends indicates an entity’s ability to generate sufficient cash to finance the purchase of new property, plant and equipment....