Formulas Flashcards
Balance sheet
Total assets - total liabilities = total equity
Solvency/current ratio
Assets / liabilities
Firms ability to pay debt
Higher ratio the better
1 = acceptable
1.5 = healthy
Liquidity/quick ratio
(Cash + AR + WIP) / liabilities
Leverage formula
Liabilities/ equity * 100
Return on equity
(NOR - expenses) / equity * 100
Money return on stockholders risk
Profit-loss/income statement
Shows all income and expenses and yearly or monthly statements
Income - expenses = profit/loss
Utilization rate
Direct labor / total time
Should be 65% for whole firm
75-85% for professionals and technicians
Overhead rate
Overhead $ / direct labor
Should be 1.3-1.5
Multiply this by direct labor. Then add it to direct labor = fee
Break-even rate
Overhead rate + 1.0
Cost of business for every hourly salary
Total cost of operations / total $ spent on labor
Should be 2.3-2.5
Employee base salary x break even rate = amount to break even
Net multiplier
NOR / direct labor
Break even rate / inverse profit %
Net revenue (not including consultant fee or reimbursable) / $ of direct labor
Should be 2.7 to 3.0
Ex. Person paid $40. Net multiplier is 3.0. Charge client $120
Direct personal expense
Cost of tax benefits are included in salary
Slightly lower than net multiplier
Profit to earnings ratio
Net profit / NOR * 100
Net revenue per employee
NOR / total # of employees
Aged accounts receivable
AR / (NOR / 365 days)
Looks at invoices when actually paid Vs due
