Accounting 1010 Ratios
Average Collection Period Formula
(365) / (Accounts Receivable Turnover)
Average Days Sales in Inventory Formula
(365) / (Inventory Turnover)
Inventory Turnover Formula
(Cost of Goods Sold) / (Average Inventory)
Acid Test Ratio = Quick Ratio Formula
(Current Assets - Inventory) / (Current Liabilities)
Current Ratio Formula
(Current Assets) / (Current Liabilities)
Price Earnings Ratio Formula (PE Ratio)
(Market Price per share) / (Earnings per share)
Return on Equity Formula
(Net Income) / (Average Equity)
Return on Assets Formula
(Net Income) / (Average Total Assets)
Earnings Per Share Formula
(Net Income) / (Weighted Average number of shares of Common Stock)
Book Value per Share Formula
(Owners' Equity) / (Number of shares of common stock)
Accounts Receivable Turnover Formula
(Sales) / (Average NET Accounts Receivable) Please note it is net so {BOY (AR-ADA) + EOY (AR-ADA)}/2
Debt Ratio Formula
(Total Liabilities) / (Total Assets)
Debt to Equity Ratio Formula
(Total Liabilities) / (Total Owners' Equity)
Acid Test Ratio = Quick Ratio Definition
Indicates whether a company has enough current assets to cover immediate liabilities without selling inventory
Book Value per share Definition
Liquidation value. The dollar amount of equity that is associated with each share of stock
Return on Assets Definition
Measure of how well a company uses its assets to create profits Want to be at least 5%
Current Ratio Definition
Measure of liquidity - a company has sufficient liquid assets to cover its current obligations Want to be at least 1
Inventory Turnover Definition
Measures the success a company has in converting its investment in inventory into sales
Return on Equity Definition
Measures the success of company's financing, investing and operating activities Want to be at least 15%
Price Earnings Ratio Definition (PE Ratio)
Tells you how expensive a share of stock is in relation to its earnings
Earnings Per Share Definition
The dollar amount of earnings that is associated with each share of stock
Debt to Equity Ratio Definition
The more debt a company carries, the more risk is being taken by the creditors as opposed to the shareholders
Average Collection Period Definition
The number of days it takes on average to collect an accounts receivable
Average Days Sales in Inventory Definition
The number of days sales, on average, that a firm carries in inventory
Accounts Receivable Turnover Definition
The number of times the accounts receivable are turned over or are collected during the period
Debt Ratio Definition
Total liabilities measured as a percentage of total assets. How well you can pay your debt
