Formulas & Ratios Flashcards
Gross Margin Percentage (Formula)
Gross Margin / Sales
Earnings per Share of Common Stock (Formula)
(Net Income - Preferred Dividends) / Average Number of Common Shares Outstanding
Price-Earnings per Share (Formula)
Market Price per Share / Earnings per Share
Dividend Payout Ratio (Formula)
Dividends per Share (Common Dividends / Common Shares) / Earnings per Share
Dividend Yield Ratio (Formula)
Dividends per Share (Common Dividends/ Common Shares) / Market Price per Share
Return on Total Assets (Formula)
Adjusted Net Income {Net Income + [Interest Expense * (1 - Tax Rate)]} / Average Total Assets
Return on Common Stockholders’ Equity (Formula)
(Net Income - Preferred Dividends) / (Average Total Stockholders’ Equity - Average Preferred Stock)
Book Value per Share (Formula)
(Total Stockholders’ Equity - Preferred Stock) / Number of common Shares Outstanding
Working Capital (Formula)
Current Assets - Current Liabilities
Current Ratio (Formula)
Current Assets / Current Liabilities
Acid-Test Ratio (Formula)
(Cash + Marketable Securities + Accounts Receivable + Short-Term Notes Receivable) / Current Liabilities
Accounts Receivable Turnover (Formula)
Sales on Account / Average Accounts Receivable Balance
Average Collection Period (Formula)
365 Days / Accounts Receivable Turnover
Inventory Turnover (Formula)
Costs of Goods Sold / Average Inventory Balance
Average Sale Period (Formula)
365 Days / Inventory Turnover
Times Interest Earned (Formula)
Net Operating Income (Earnings before Interest Expense and Income Taxes) / Interest Expense
Debt-to-Equity Ratio (Formula)
Total Liabilities / Stockholders’ Equity
Prime Cost (Formula)
Direct Materials Cost + Direct Labor Cost
Conversion Cost (Formula)
Direct Labor Cost + Manufacturing Overhead Cost
High Low Method of Cost Accounting (Process)
- identify the periods of the lowest and highest activity.
- Compute the variable cost per unit using those two data points:
(Variable Cost = Change in Cost/Cost in Activity) - Compute the fixed cost element by deducting the variable cost element from the total cost at either the high or low activity:
(Fixed Cost = Total Cost - Variable Cost) - Express data in the cost formula Y = a + bX
High Low Method of Cost Accounting (Significance)
Change in Cost/Cost in Activity
Predetermined Overhead (Steps & Formulas)
Step 1: Estimated Total Overhead Cost
ETMOC = a + b(X)
a = ETFOC (Estimated Total Fixed Overhead Cost)
b = EVMOC (Estimated Variable Manufacturing Overhead Cost per Unit of the Allocation Base)
X = ETAAB (Estimated Total Amount of the Allocation Base)
Step 2: Predetermined Overhead Rate
POR = ETMOC / ETAAB
Step 3: Overhead Applied to a Particular Job
OAPJ = POR * AABIJ
AABIJ = Amount of the Allocation Base Incurred by the Job
