Important Formulas

Question 1

Accounts receivable turnover formula

Answer 1

Sales (net) ÷ Average accounts receivable (net)

Question 2

Asset turnover formula

Answer 2

Sales (net) ÷ Average total assets

Question 3

Cash conversion cycle formula

Answer 3

Days sales in accounts receivable + Days in inventory - Days of payables outstanding

Question 4

Current Ratio formula

Answer 4

Current assets ÷ current liabilities

Question 5

Days in inventory formula

Answer 5

Ending inventory ÷ (COGS ÷ 365)

Question 6

Days of payable outstanding formula

Answer 6

Ending accounts payable ÷ (COGS ÷ 365)

Question 7

Days sales in accounts receivable formula

Answer 7

Ending AR (net) ÷ (Sales (net) ÷ 365)

Question 8

Debt to equity formula

Answer 8

Total liabilities ÷ Total equity

Question 9

Dividend payout formula

Answer 9

Cash dividends ÷ Net income

Question 10

Equity multiplier

Answer 10

Total assets ÷ Total equity

Question 11

Gross margin (Gross profit margin) formula

Answer 11

(Sales (net) - COGS) ÷ Sales (net)

Question 12

Inventory turnover formula

Answer 12

COGS ÷ Average inventory

Question 13

Operating leverage formula

Answer 13

Fixed costs ÷ (Fixed costs + Variable costs)

Question 14

Operating cash flow ratio

Answer 14

Cash flow from operations ÷ Ending current liabilities

Question 15

Price earnings ratio

Answer 15

Price per share ÷ Basic earnings per share

Question 16

Profit margin

Answer 16

Net Income ÷ Sales (net)

Question 17

Quick ratio (Acid-test)

Answer 17

(Cash and cash equivalents + Short-term marketable securities + Receivables (net)) ÷ Current liabilities

Question 18

Total debt ratio

Answer 18

Total liabilities ÷ Total assets