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UW ACCTG 225 Ratios
Accounting ratios and important things to remember for ACCTG 225
| Term | Definition |
|---|---|
| Working Capital | Current assets - Current liabilities |
| Current ratio | Current assets/ Current liabilities |
| Average collection period | 365 days / Accounts receivable turnover |
| Inventory turnover | cost of goods sold / average inventory balance |
| Average sale period | 365 days / Inventory turnover |
| Operating cycle | average sale period + average collection period |
| Total asset turnover | sales / average total assets |
| times interest earned | earnings before interest expense and income taxes (EBIT) / interest expense |
| Debt- to- equity ratio | Total liabilities / stockholder's equity |
| equity multiplier | average total assets / average stockholder's equity |
| gross margin percentage | gross margin / sales |
| net profit margin percentage | net income / sales |
| return on equity | net income / average total stockholder's equity |
| earnings per share | Net income / average number of common shares outstanding |
| price-earnings ratio | market price per share / earnings per share |
| dividend payout ratio | dividends per share / earnings per share |
| dividend yield ratio | dividends per share / market price per share |
| book value per share | total stockholder's equity / number of common shares outstanding |
| Profitability Index (PI) | NPV / Investment required |
| Simple rate of return (SRR) | annual incremental NOI / initial investment |
| Internal Rate of Return (IRR): Annuity | Investment required / annual net cash inflow |
| Internal Rate of Return (IRR): Lump Sum | Investment required / lump sum amount |
| Net Present Value | Present value of cash inflows - Present value of cash outflows |
| Payback Period | Investment required / annual net cash inflows |
| Contribution Margin (CM) | Revenue - Variable Costs |
| Gross Margin | Revenue - COGS |
| Contribution Margin Ratio (CMR) | Contribution Margin / sales |
| Unit Contribution Margin (CM/U) | Contribution margin / price |
| Margin of Safety (in dollars) | Total budgeted (or actual) sales - breakeven sales |
| Margin of Safety (percentage) | Margin of Safety in dollars / total budgeted (or actual) sales |
| Degree of Operating Leverage | Contribution Margin / Net Operating Income OR % change in NOI = DOL * % change in sales |
| PdOR | Estimated total manufacturing overhead cost / estimated total amount of the allocation base |
| Total manufacturing overhead applied | PdOR * Actual total amount of the allocation base incurred during the period |
| under/over applied overhead (how to calculate) | Actual total MOH - applied total MOH (or vice versa) |
| Quantity Variance | SPAQ - SPSQ (flexible) |
| Efficiency Variance | SRAH - SR(SH * actual units produced) (flexible) |
| Activity Variance | Flexible - Planning |
| Price Variance | APAQ (actual) - SPAQ |
| Rate Variance | ARAH (actual) - SRAH OR AH(AR-SR) |
| Spending or Revenue Variances | Actual - Flexible |
| Volume Variance | Budgeted (Planning) - Applied to WIP (Flexible) |
| Budget Variance | Actual - Budgeted (Planning) |
| Materials Quantity Variance | SP(AQ used in production - (SQ * actual units produced)) |
| Materials Price Variance | AQ purchased (AP - SP) |
| Return on Total Assets | (Net Income + Interest Expense * (1 - tax rate)) / average total assets |
| Earnings Before Interest and Taxes (EBIT) | Net income + Tax Expense + Interest Expense |
| Quick Ratio | Quick Assets / Current Liabilities |
| What's a quick asset? | Cash, marketable securities, accounts receivable, and short-term notes receivable |
| Accounts Receivable Turnover | Sales on Account / Average accounts receivable balance |
| Return on Investment (ROI) | Margin * Turnover OR NOI / avg. operating assets |
| Margin | Net Operating Income / Sales |
| Turnover | Sales / Average Operating Assets |
| Residual Income | NOI - (avg. operating assets * required rate of return) |
| Investment required | initial investment - existing investment salvage value |
| Initial investment | Initial investment |
Created by:
Suzilla
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