Formulas Flashcards
Breakeven ($)
FC / CM % per unit
- BE (units)
FC / CM($) per unit
ROI
net income / cost of investment
so anything that has “cost of investment” use ROI
Gross margin
(Rev - COGS) / rev
o Operating margin
operating income / revenue
o Net profit margin
net income / revenue
o ROA
net income / total assets
how efficient a company’s management is in generating profit from their total assets on their balance sheet.
ROE
net income / shareholders’ equity
gauge of a corporation’s profitability and how efficiently it generates those profits
what are the profitability ratios
ROE
ROA
gross margin
net income margin
operating margin
what are the turnover ratios
inventory turnover
AR turnover
AP turnover
Inventory turnover
COGS / average inventory
Days in inventory: 365 / turnover ratio
where is derived from EI = BI + purchases - COGS
Tells how many days it takes company to turnover inventory. lower the better. Lower carrying costs and obsolescence.
AR turnover
annual credit sales / average AR
Days in AR = 365 / turnover ratio
Days tells you how long it takes to receive payment from suppliers
AP turnover
AP / average AP
Days in AP = 365 / turnover ratio
How many days it takes to pay suppliers
liquidity ratios
current ratio
quick ratio
current ratio
CA / CL
shows whether ST liabilities can be covered by ST assets
want to be high to avoid liquidity issues
