Accounting Concepts and Ratios

Accounting Equation

• @@A = L + OE@@

• @@A + L = OE@@

• @@OE = A - L@@

• @@L = A + OE@@

Gross Profit

• Sales – Cost of Goods Sold

• Total Revenue – Operating Expenses

• Net Income – Taxes

• Sales – Marketing Expenses

Working Capital

• Current Assets + Current Liabilities

• Current Assets – Current Liabilities

• Current Assets x Current Liabilities

• Current Assets / Current Liabilities

Future Value of Money

• @@FV = PV (1 + i)^{n \cdot t}@@

• @@PV = FV (1 + i)^{-n \cdot t}@@

• @@FV = PV (1 - i)^{n \cdot t}@@

• @@FV = PV + (PV \cdot i \cdot t)@@

Earnings Per Share (EPS)

• Net Earnings / # of Outstanding Shares of Common Stock

• Total Revenue / # of Outstanding Shares of Common Stock

• Net Earnings / Total Assets

• Net Earnings / # of Total Shares

Interest Coverage Ratio

• Earnings Before Interest and Taxes / Interest Expense

• Total Debt / Total Assets

• Net Income / Total Revenue

• Operating Income / Current Liabilities

Breakeven Point

• @@\frac{FC}{SP_{u\ }- VC\ _u}@@

• @@\frac{SP_u - VC_u}{FC}@@

• @@\frac{FC + VC_u}{SP_u}@@

• @@\frac{SP_u}{FC}@@

Operating Profit Margin Formula

• @@rac{Operating\, Profit}{Total\, Revenue}@@

• @@rac{Total\, Revenue}{Operating\, Profit}@@

• @@rac{Operating\, Profit}{Net\, Income}@@

• @@rac{Net\, Income}{Total\, Revenue}@@

Net Profit Margin Formula

• @@rac{Net ext{ }Income}{Revenue}@@

• @@rac{Revenue}{Net ext{ }Income}@@

• @@Net ext{ }Income - Revenue@@

• @@rac{Net ext{ }Income + Revenue}{2}@@

Return on Equity (ROE)

• @@\frac{Net\ Income}{Shareholders’\ Equity}@@ - Shows how much profit results from each dollar of shareholders’ investments.

• @@\frac{Total\ Assets}{Total\ Liabilities}@@ - Measures a company's financial leverage.

• @@\frac{Net\ Income}{Total\ Revenue}@@ - Indicates the profitability of a company.

• @@\frac{Operating\ Income}{Total\ Equity}@@ - Reflects the efficiency of a company's operations.