Accounting: Basic Ratios Flashcards
Formula:
Net Present Value
FV = PV x [1+(i/n)]^(n x t)
PV = FV [1+(i/n)]^(n x t)
FV: Future Value
PV: Present Value
i: Interest Rate
n: Number of interest periods per year
t: Number of years
Ratio:
Cross Product
X/Y = A/B
XB = AY
Formula:
Shareholders’ Equity
SE = Total Assets - Total Liabilities
An accounting measure of a firm’s net worth (not an accurate valuation)
Formula:
Book Value (ex. PPE)
BV = Acquisition Cost - Accumulated Depreciation
Formula
Goodwill
GW = Amount Paid - Value of Assets
Can be adjusted annually via a “write-down”, similar to depreciation
Formula
Net Working Capital
NWC = Current Assets - Current Liabilities
Ratio:
Market-To-Book Value
M2B = Market Value / Book Value
Ratio:
Leverage
or
Debt-Equity Ratio
D/E = Total Debt / Total Equity
Formula:
Enterprise Value
EV = Market Value of Equity + Debt - Cash
Ratio:
Gross Margin
GM = Gross Profit / Sales
Ratio:
Operation Margin
OM = Operating Income / Sales
Ratio:
Net Profit Margin
NPM = Net Income / Total Sales
Ratio:
Asset Turnover
AT = Total Sales / Total Assets
Ratio:
Accounts Receivable Days
A/R Days = Total A/R / Avg. Daily Sales
Ratio:
Return on Equity
ROE = Net Income / Book Value of Equity
