17 terms

Managerial ACTG Chapter 14 Formulas

Current Ratio
Current Assets / Current Liabilities
Acid-Test (Quick) Ratio
Cash + Short Term Investments + Receivables (Net)/
Current Liabilities
Receivables Turnover
net credit sales/average Net. receivables; Used to determine how long it takes to collect on Receivables
Inventory Turnover
the number of times per year that a company sells or "turns over" its average inventory. Cost of Goods Sold/ Average Inventory
Profit Margin
Net income / Net sales
Asset Turnover
a measure of how efficiently an entity uses its assets to generate sales. Net Sales/ Average Assets.
Return on Assets
Indicates the amount of profit earned on each dollar the firm has invested in assets [net income/average total assets]
An owners portion of an item
Debt to Total Assets
total debt/ total assets
Return on Common Stockholders Equity
Net Income/ Average common stockholders equity
Earnings per share
A form of profitability ratio calculated as Net Income/ Weighted average of common shares outstanding.
Price Earnings Ratio
market price per share/earnings per share
Payout Ratio
Cash dividends declared on common stock / Net income
Times interest earned
(Net income + Interest Expense + Income Tax Expense)/Interest Expense
Vertical Analysis
Also known as common-size analysis). A method of analyzing comparative financial statements in which percentages are computed for each item within a statement to a total within the statement. On a Balance Sheet you divide by Total Assets. On an Income Statement you divide by Total Sales.
Horizontal Analysis
(Also known as Trend Analysis). Looks at the percentage change in a line item's value from one year to the next using the formula: [(subsequent year -base year)/base year)
Solvency Ratios
Measures of the ability of the company to survive over a long period of time