FAR-Formulas

Question 1

What is the formula for Inventory Turnover?

Answer 1

Cost of goods sold / Average inventory

Question 2

What is the formula for Gross Margin?

Answer 2

Sales - COGS

Question 3

What is the formula for Working Capital?

Answer 3

Current Assets - Current Liabilities.

Question 4

What is the formula for Earnings Per Share?

Answer 4

Net income / average outstanding common shares

Question 5

What is the formula for the PE Ratio?

Answer 5

Stock Market Price / Earnings Per Share

Question 6

What is the formula for the Quick Ratio? (Also know as Acid Ratio.)

Answer 6

(Current Assets - Inventory)/Current Liabilities

Question 7

What is the current ratio?

Answer 7

Current Assets/Current Liabilities

Question 8

What is formula for the Number of Days’ Sales in Average Inventories?

Answer 8

(Average inventory at cost/COGS)*365

OR

365 / (Cost of Goods Sold/ Avg Inventory)

Question 9

How is the debt to equity ratio calculated?

Answer 9

Debt to equity = Total liabilities /
Common stockholder’s equity

*equity is in dollars

Question 10

How is Diluted EPS Calculated?

Answer 10

(Profit or loss attributable to common equity holders of parent company
+ After-tax interest on convertible debt + Convertible preferred dividends)

Divided By

(Weighted average number of common shares outstanding during the period
+ All dilutive potential common stock)

Question 11

What is the Accounts Receivable Turnover Ratio?

Answer 11

Net Credit Sales / Average Accounts Receivable