ratios

Question 1

Gross profit margin ratio

Answer 1

Net sales - COGS / Net sales
shows margin revenue above COGS

Question 2

Accounts receivables turnover

Answer 2

Net credit sales / Average Acc. receiv.

determines how often acc rec are collected

Question 3

Avg Accounts receivables

Answer 3

begin. acc rec + end. acc rec / 2

Question 4

Number of days’ sales in receivables

Answer 4

365 / acc. receivables turnover

shows expexted days to turn acc rec into cash

Question 5

Net Purchases

Answer 5

Gross purchases - Purchase discounts - Purchase returns & allowances

Question 6

Net Sales

Answer 6

Gross sales - Sales discount - Sales returns & allowances

Question 7

COGS

Answer 7

beginning inv. + Net purchases - ending inv.

Question 8

Gross margin

Answer 8

Net sales - COGS

Question 9

Income from operations

Answer 9

Gross margin - Operating expenses

Question 10

Net realizable value

Answer 10

acc receiv. - allowances for doubtful accounts

Question 11

Inventory turnover ratio

Answer 11

COGS / Avg. inv

measures the number of times an avg quantity of inventory was bought/sold

Question 12

Number of days’ sales in inventory

Answer 12

Avg. merch. inv / Avg. daily COGS

how many days it would take to clear remaining inventory

Question 13

Avg. daily COGS

Answer 13

COGS / 365

Question 14

Fixed Asset turnover

Answer 14

Net sales / Avg. net Fixed assets

sales generated by each dollar of fixed assets

Question 15

Total goods available for sale

Answer 15

begin. inv + purchases

Question 16

goodwill

Answer 16

paid price - book value of net assets

Question 17

straight line depreciation

Answer 17

(acquisition cost - salvage value) / useful life

Question 18

units of production depreciation

Answer 18

depreciable base / usage

Question 19

double declining balance

Answer 19

2 × 100 / useful life x book value

Question 20

depletion cost per unit

Answer 20

total cost - residual value / estimated units

Question 21

interest

Answer 21

principal × interest rate × period of time

Question 22

Debt to equity ratio

Answer 22

Total debt / Total equity

measures portion of debt used by a company relative to stockholders equity

Question 23

Earnings per share EPS

Answer 23

Net income - Preferred dividends /
Weighted avg. com. shares outst.

portuon of corporations profit allocated to each outstanding share of common stock

Question 24

quote

Answer 24

current market price /
maturity value × 100

Question 25

interes payment

Answer 25

stated rate × face value

Question 26

interest expense

Answer 26

market rate × carrying value

Question 27

Amortization of a loan

Answer 27

date, beginning balance, payment, to interest, to principal, ending balance

Question 28

Amortization of a bond payable at discount

Answer 28

date, interest expense, interest payment, amortization, discount bal, bonds payable, book value

Question 29

Amortization of a bond at premium straight line

Answer 29

date, bonds payable, premium bal, amortization, book value

Question 30

Amortization of a bond payable on premium

Answer 30

date, interest payment, interest expense, amortization, premium balance, bonds payable, book value

Question 31

working capital

Answer 31

current assets - current liabilities (what is left after current liabilities are covered)

Question 32

current ratio

Answer 32

current assets / current liabilities proportion

Question 33

quick ratio

Answer 33

Cash + Short term investment + Ac rec / Current liabilities

Question 34

interest earned

Answer 34

Earnings before interest and taxes / Interest expense ability to pay interest

Question 35

total asset turnover

Answer 35

Net sales / Average total assets ability to use assets to make revenue

Question 36

profit margin

Answer 36

Net income / Net sales how much of sales revenue has turned into income

Question 37

return on total assets

Answer 37

Net income / Avg total assets ability to use assets to make profit

Question 38

return on equity

Answer 38

Net income / Avg equity ability to use invested capital to make income