FAR Cumulative Formulas

Question 1

Times Interest Earned

Answer 1

EBIT / Interest Expense

For the numerator, essentially you are taking your Net income before taxes and adding back the interest

Question 2

Cash Conversion Cycle

Answer 2

Days Sales in A/R + Days in Inventory - Days in Payable Outstandings

Question 3

Debt-to- Equity

Answer 3

Total Liabilities / Total Equity

Question 4

Composite Depreciation - Averaging Economic Lives

Average Composite Life

Answer 4

Total Depreciable Base / Total Annual Depreciation

Question 5

Inventory Turnover

How quickly inventory is sold - the higher the better

Answer 5

COGS / Average Inventory

Question 6

Working Capital Turnover

Answer 6

Sales/Average Working Capital

Question 7

Discounting - Sale of Notes Receivable

Bank Discount

Answer 7

Discount * Maturity Value

Question 8

Sum-of-the-year’s Digits Depreciation & Depreciation Expense

Provides higher expenses in early years and lower expenses in later years

Answer 8

S = Useful life x (Useful life + 1) / 2
Depreciation Expense = (Cost - Salvage Value) x Remaining Life / Sum of the years digit

Question 9

Common Share Outstanding

Answer 9

Shares Issued - Shares Repurchased

Question 10

Double Declining Depreciation

Used when asset has rapid obsolescene

Answer 10

Cost - Accumulated Deprecation x ( 2/Useful Life)

NO Salvage Value

Max Accumulated Depreciation = Cost - Salvage Value

Question 11

Depletion

Yearly Depletion

Answer 11

Unit Depletion x Units extracted

Question 12

Bottom Up EBITDA

Answer 12

Net Income + Income Tax + Interest Expense + Depreciation/Amortization Expenses

Question 13

Depletion

Yearly Depletion in COGS

Answer 13

Unit Depletion x Units Sold

Question 14

Depletion

Unit of Depletion Rate

Answer 14

Depletion Base / Estimated Recoverable Units

Question 15

Days in Inventory

Average # of days to sell inventory

Answer 15

Ending Inventory / (COGS / 365)

Question 16

Total Debt Ratio

Answer 16

Total Liabilties / Total Assets

Question 17

Quick Ratio

Answer 17

Cash and cash equivalents + Short term marketable securties + A/R (net) / Current Liabilities

Question 18

Gross Profit Margin

Answer 18

Sales (net) - COGS / Sales (net)

Question 19

Moving Average Method

Answer 19

Total Inventory Cost / Total # of Units Available

Question 20

Cash to Accrual

Accrual Basis Revenue

Answer 20

Cash Basis Revenue + Ending A/P - Beginning A/P - Ending Unearned Revenue + Beginning Unearned Revenue

Question 21

Discounting - Sale of Notes Receivable

Interest Income (Expense)

Answer 21

Amount Paid - Face Value

Question 22

Return on Sales

Answer 22

Net Income / Average Total Assets

Question 23

Return on Assets

Answer 23

Net income / Average total assets

Question 24

Cash to Acrrual

Accrual Operating Expenses

Answer 24

Cash Paid for Operating Expenses + Ending accrued liabilities - beginning accrued liabilities + ending prepaid expenses + beginning prepaid expenses

Question 25

Return on Equity

Answer 25

Net Income - Preferred Dividends / Average Total Equity

Question 26

Book Reconcilation | Book Reconcilation in **BINS**

Answer 26

(+) Bank Collect (+) Interest Expense (-) Non-Suffient Funds (NSF) (-) Service Charges

Question 27

# Impairment Test of Recoverability

Answer 27

Undicounted Future Net Cash Flows - Net Carrying Value ## Footnote If Positive - No impairment Loss If Negative - Impairment Loss

Question 28

Top Down EBITDA

Answer 28

Sales - COGS - Operating Expense (excluding depreciation and amortization)

Question 29

# Composite Depreciation - Averaging Economic Lives Annual Depreciation

Answer 29

Depreciable Base / Useful Life

Question 30

Solvency

Answer 30

Debt / Equity

Question 31

Treasury Stock Method | REMEMBER the use is for Stock Options and Warrants ## Footnote Average Price > Strike Price

Answer 31

Number of Shares - # of Shares * Excercise Price / Average Market Price

Question 32

Units-of-Production Depreciation ## Footnote Service production declines with use

Answer 32

Number of Units Produced x (Cost - Salvage Value)/ Estimated Total Units

Question 33

# Discounting - Sale of Notes Receivable Amount Paid by the Bank

Answer 33

Maturity Value - Bank Discount

Question 34

Profit Margin (net)

Answer 34

Net Income / Sales (net)

Question 35

# Lower of Cost and Market Replacement Cost

Answer 35

Cost to Purchase the Item

Question 36

Dupont Return on Asset

Answer 36

Profit Margin x Total Asset Turnover OR Net Income / Average Total Assets

Question 37

Straight Line Depreciation ## Footnote Service potential declines over time

Answer 37

Cost - Salvage Value / Estimated Useful Life

Question 38

Book Value per Common Share

Answer 38

Assets - Liabilties - Preferred Equity - Dividends in Arrears

Question 39

Equity Multiplier

Answer 39

Total Assets / Total Equity

Question 40

Impairment

Answer 40

Discounted Future Net Cash Flows - Net Carrying Value

Question 41

Comprehensive Income

Answer 41

PUFI + OCI ## Footnote P- Pension Adjustment U - Unrealized Gains/Losses F - Foreign Currency Items I - Instrument Specific Credit Risk

Question 42

# Depletion Depletion Base

Answer 42

Total Cost (Cost of Land + Development Costs + Restoration) - Residual Value

Question 43

A/R Turnover | Success of collecting outstanding A/Rs

Answer 43

Sales (net) / Average A/R (net)

Question 44

# Cash to Accrual COGS

Answer 44

Cash Paid for Purchases + Ending A/P - Beginning A/P - Ending Inventory + Beginning Inventory

Question 45

Liquidity

Answer 45

Current Assets / Current Liabilities

Question 46

Operating Cash Flow Ratio

Answer 46

CFs from Operations / Current Liabilities

Question 47

# Composite Depreciation - Averaging Economic Lives Depreciable Base

Answer 47

Cost - Accumulated Depreciation

Question 48

# Lower of Cost and Net Realizable Value Net Realizable Value | Used for FIFO or Weighted Average

Answer 48

Selling Price - Cost to Sell

Question 49

Asset Turnover

Answer 49

Sales (net) / Average Total Assets

Question 50

Current Ratio | Ability to meet short term obligations

Answer 50

Current Assets / Current Liabilities

Question 51

# Lower of Cost and Market Market Ceiling | Used for LIFO or retail inventory method

Answer 51

NRV = Selling Price - Cost to Sell

Question 52

# Discounting - Sale of Notes Receivable Present Value

Answer 52

Face Value - Unearned Interest

Question 53

# Discounting - Sale of Notes Receivable Maturity Value

Answer 53

Interest + Face Amount of Note

Question 54

Day Sales in A/R | Average # of days to collect A/R

Answer 54

Ending A/R (net) / (Sales (net) / 365)

Question 55

A/P Turnover | Average # of times trade payable turnover during a period

Answer 55

COGS / Average A/P

Question 56

Weighted Average Common Shares Outstanding (WACSO)

Answer 56

Shares Outstanding at the Beginning of the Period + Shares Sold During the period - Shares reacquired during the period + Stock Dividends and Stock Splits - Reverse Stock Splits ## Footnote Stock Dividends and Splits are Retroactively Adjusted Shares Sold/Reacquired are based on a time-weighted basis

Question 57

Bank Reconciliation | **DO** Bank Reconciliation

Answer 57

(+) Deposits in Transit (-) Outstanding Checks

Question 58

Dividend Payout

Answer 58

Cash Dividends / Net Income

Question 59

Cost of Goods Sold

Answer 59

Beginning Inventory + Purchases - Ending Inventory | Beginning Inventory + Purchases = COG Available for Sale

Question 60

Weighted Average Method | Used for homgenous products (periodic)

Answer 60

Total Inventory Costs Available / Total Number of Units Available

Question 61

Days in Payable Outstandings | Average # of days to collect A/R

Answer 61

Ending A/R / (Sales (net) / 365)

Question 62

# Lower of Cost and Market Market Floor

Answer 62

NRV - Normal Profit

Question 63

Basic EPS

Answer 63

Income Available to Common Shareholders / WACSO ## Footnote Income Available to Common Shareholders = Net Income - Preferred Dividends

Question 64

Retained Earnings

Answer 64

Net Income/Net Loss (Dividends Declared) +/- Prior Period Adjust. +/- Accounting Changes Retrospective

Question 65

Diluted EPS

Answer 65

Income Available to Common Shareholders +Interest on Dilutive Securities / WACSO (with all securities converted to common stock)