Includes formulas and ratios for financial accounting

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  • Basic Accounting Equation

    Assets = Liabilities + Stockholders' Equity

    Net Income

    Revenue - Expenses

    Stockholders' Equity

    Retained Earnings + Common Stock

    Retained Earnings

    Beginning Balance + Net Income - Dividends

    Net Realizable Value

    Accounts Receivable - Allowance for Doubtful Accounts

    Cost of Goods Sold

    Beginning Inventory
    +Cost of goods purchased during the period
    =Cost of goods available for sale
    -Ending Inventory

    Gross Profit

    Revenue - COGS

    Net Book Value

    Cost of an asset - Accumulated Depreciation

    Net Sales

    Revenue - (Allowances+Discounts+Returns)

    Current Ratio

    Current assets / Current liabilities

    Higher is better. Measures Liquidity.

    Debt-to-total-assets Ratio

    Total Liabilities / Total Assets

    Lower is better. Measures solvency.

    Return on Sales Ratio

    Net Income / Net Sales

    Higher is better. Measures profitability.

    Free Cash Flow

    Cash from operations - Capital Expenditures

    Inventory Turnover Ratio

    Cost of Goods Sold / Average Inventory

    Days' Sale Inventory

    365 / Inventory Turnover Ratio

    Average Inventory

    (Beginning Inventory + Ending Inventory) / 2

    Earnings per Share

    Net Income / # of outstanding shares

    Working Capital

    Current assets - Current liability


    Principal X Interest Rate X Time

    Accounts Receivable Turnover

    Net Sales / Average Accounts Receivable

    Average Collection Period

    365 / Accounts Receivable Turnover

    Annual Straight-line Depreciation

    (Acquisition cost - salvage value) / Estimated useful life

    Return on Assets

    Net income / Average total assets

    Asset Turnover

    Net Sales / Average total assets

    Quick ratio

    (Cash + short-term investments + accounts receivable) / Current Liabilities

    Times Interest Ratio

    Income before expense / interest expense

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