REVIEW Flashcards
1
Q
Times Interest Earned Ratio
A
(Net Income before tax + Interest Expense) / Interest Expense
2
Q
Asset Turnover Ratio
A
Sales Revenue / Average Total Assets
3
Q
Contribution Margin
A
Contribution Margin / Sales
Contribution Margin (Sales - variable costs)
4
Q
AR - Calculate Average Collection Period in Days
A
Average collection period is an activity ratio that measures the average number of days needed to collect trade accounts receivable. It measures how rapidly the firm’s credit sales are being collected (the lower the ratio, the more efficient the collection).
Computation:
365 ÷ AR Turnover, or 365 ÷ (Net Credit Sales ÷ Average AR), or Average AR ÷ Average Daily Sales, or Average AR ÷ (Net Credit Sales ÷ 365)
