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formulaes for business (1 Viewer)
- Thread starter wrxsti
- Start date
Liquidity:
Current Assets
Current Liabilities
(generally ideally 2:1, but depends on type of industry business is in)
Solvency:
Total debts
Owner's Equity
(the higher the ratio, the less solvent the firm)
Profitability (always expressed as %age)
Gross Profit Ratio:
Gross Profit x 100
Sales
Net Profit Ratio:
Net Profit x 100
Sales
Return on Owner's Equity Ratio:
Net Profit x 100
Owner's Equity
Efficiency:
Expense Ratio:
Expenses x 100
Sales
Accounts Receivable Turnover Ratio:
Sales = Answer
Accounts Receivable
365 > 12 (ie, accounts receivables collected every 30 days or quicker)
Answer
Accounting Equation:
Assets = Liabilities + Owner's Equity
Gross Profit Equation:
Sales - COGS
Net Profit Equation:
Gross Profit - Expenses
(Sales - COGS - Expenses)
Working Capital Equation:
Current Assets - Current Liabilities
Current Assets
Current Liabilities
(generally ideally 2:1, but depends on type of industry business is in)
Solvency:
Total debts
Owner's Equity
(the higher the ratio, the less solvent the firm)
Profitability (always expressed as %age)
Gross Profit Ratio:
Gross Profit x 100
Sales
Net Profit Ratio:
Net Profit x 100
Sales
Return on Owner's Equity Ratio:
Net Profit x 100
Owner's Equity
Efficiency:
Expense Ratio:
Expenses x 100
Sales
Accounts Receivable Turnover Ratio:
Sales = Answer
Accounts Receivable
365 > 12 (ie, accounts receivables collected every 30 days or quicker)
Answer
Accounting Equation:
Assets = Liabilities + Owner's Equity
Gross Profit Equation:
Sales - COGS
Net Profit Equation:
Gross Profit - Expenses
(Sales - COGS - Expenses)
Working Capital Equation:
Current Assets - Current Liabilities
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