Accounting and Finance Equations
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32 terms
Terms | Definitions |
|---|---|
 Accounting Equation | Assets-Liabilities=Owners Equity |
| Gross Profit | Cost of Sales-Net Sales |
| Net Book Value | Original Cost-Accumulated Depreciation |
| Average Cost | Cost of Inventory on Hand/Number of units on hand |
| Horizontal Analysis Computing Dollar Changes | Current Year balance-Prior Year balance |
| Horizontal Analysis Computing Percentage Changes | $ Change/Base Period |
| Trend | Any year $/Base year $ |
| Working Capital | Current Assets-Current Liabilities |
| Current Ratio | Current Assets/Current Liabilities |
| Acid Test Ratio | (Cash+Short Term Investments+Net Current Receivables)/Current Liabilities |
| Average Days Sales | Net sales/365 |
| Inventory Turnover | average inventory/Costs of goods sold * 365 |
| Debt Ratio | Total liabilities/Total assets |
| Times Interest Earned | Operating Income/Interest Expense |
| Return on sales | Net Income/Net Sales |
| Return on Assets | (Net Income+Interest Expense)/Average Total Assets |
| Return on Equity | (Net income-Preferred dividends)/Average common Equity |
| Earnings Per Share | (Net Income-Preferred dividends)/Number of common shares outstanding |
| P/E Ratio | Market Price per share/Earnings per share |
| Dividend Yield | Dividends per share/Market price per share |
| Book Value | Common Equity/Common Shares Outstanding |
| Variable Cost Per Unit | Change in total cost/change in activity |
| Total Fixed Costs | Total mixed cost-Total variable cost |
| Total mixed cost | (Variable cost * Number of units) +Total fixed costs |
| Operating Income | Sales-Variable Costs-Fixed costs |
| Contribution margin per unit | Sales revenue per unit-variable costs per unit |
| Breakeven Point in units | Fixed Costs/Contribution margin per unit |
| Contribution Margin Ratio | Contribution margin/Sales revenue |
| Breakeven point in sales sterlings | Fixed costs/contribution margin ration |
| Target Sales in Sterling | (Fixed Costs+Desired operating income)/Contribution margin Ratio |
| Margin of Safety in Units | Expected Sales in units-Breakeven sales in units |
| Margin of safesty in sterlings | Expected sales in sterlings-Breakeen sales in sterlings |
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