Formulas Flashcards
What is the Working Capital Ratio (WCR)?
Current Assets/Current Liabilities
(a liquidity indicator that assesses the firm’s ability to meet its short-term debts as they fall due by measuring the ratio of current assets to current liabilities)
What is the Debt Ratio?
Debt Ratio = Total Liabilities/Total Assets x 100
measures the proportion of the firm’s assets that are funded by external sources
What is the depreciation expense formula?
= HC less RV/Life
HC = Historical cost: the original purchase price of the non-current asset
RV = Residual Value: the estimated value of the non-current asset at the end of its useful life
Life = Useful Life: the estimated period of time for which the non-current asset will be used (by the current entity) to earn revenue. (This is usually measured in years)
What is the Depreciation rate (% per annum)?
Depreciation Expense/Historical Cost x 100
What is the Accounts Receivable formula?
Accounts Receivable Balance at Start (from Balance Sheet at the Start)
+ Credit Sales incl. GST (Sales Journal)
- Receipts from Accounts Receivable (Cash Receipts Journal)
= Accounts Receivable Balance at the End (as will be reported in the Balance Sheet at the end)
What is the Accounts Payable formula?
Accounts Payable Balance at Start (from Balance Sheet at the Start)
+ Credit Purchases incl. GST (Payments Journal)
- Payments to Accounts Payable (Cash Payments Journal)
= Accounts Payable at the End (as will be reported in the Balance Sheet at the end)
What is the GST formula?
GST Balance at Start (from Balance Sheet at Start)
- GST Settlement (CPJ) or GST Refund (CRJ)
+ GST received on Cash Sales compounded with GST charged on Credit Sales
- GST Paid on Credit Purchases compounded GST Incurred on Credit Purchases
= GST Balance at End (Reported in the Balance Sheet at the End)
What is Inventory Turnover?
= Average Stock/ Cost of Goods Sold x 365
(an efficiency indicator that measures the average number of days it takes for a business to convert its inventory into sales)
What is Accounts Receivable Turnover?
= Average Debtors/Credit Sales x 365
(an efficiency indicator that measures the average number of days it takes for a business to collect cash from its Accounts Receivable)
What is Accounts Payable Turnover?
= Average Creditors/Credit Purchases x 365
an efficiency indicator that measures the average number of days it takes for a business to pay its Accounts Payable
