Cheatsheet for Accounting

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Return on Assets ROA: (NI + Interest Expense, Net Tax Savings)/Ave. Total Assets
The ability of assets to generate income ,regardless of how those assets are financed.
ROA=Profit Margin(for ROA)xTotal Asset Turnover Ratio
Profit Margin for ROA: (NI + Interest Expense, Net Tax Savings)/Sales
Relative sales to expenses.
Asset Turnover: Sales/Ave. Total Assets
How well a company’s assets generate sales.
AR Turnover: Net Sale on Account/Ave. AR–or -
Sales Revenue/Ave. AR
How quickly a firm collects cash from AR.
Converted into “Days Outstanding for AR”  365/AR Turnover Ratio
Common Changes in Ratio
Inventory Turnover: CSG/Ave. Inventory
How fast a firm sells inventory.
Generally, you want a high inventory turnover.
Fixed Asset Turnover: Sales/Ave. Fixed Assets
The amount of sales generated from fixed assets
ROCE: (Net Income – PS Dividends)/Ave. Common OE
A firms ability to use & finance assets to generate earnings.
Profit Margin (for ROCE): (Net Income – PS Dividends)/Sales
The portion of sales left over for common shareholders.
Asset Turnover: Sales/Ave. Total Assets
How well assets generate sales.
Capital Structure Leverage: (Ave. Total Assets)/Ave. Common OE
Total assets provided by common shareholders.
EPS: (Net Income – PS Dividends)/Ave. No. CS Outstanding
Net income per share of common stock.
PE Ratio: Market Price per Share (FMV)/EPS
Stock sells at X times earnings.
Current Ratio: Current Assets/Current Liabilities
A company’s ability to pay current liabilities. Should be >1.
Quick Ratio: (Cash + Marketable Securities + AR)/Current Liab.
Are the assets which are easily convertible to cash sufficient to pay current liabilities? QR=CR/2
Cash Flow from Ops. to Current Liabilities Ratio: Cash Flow from Ops.
/Ave. Current Liab.
During the period, was cash flow sufficient to pay current liabilities?
AP Turnover: Purchases on Account/Ave. Accounts Payable
How inventory purchases are financed.
Liabilities to Assets

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