In this presentation, various calculations used in Accounting 30 will be displayed and explained.
Earnings Performance Analysis Rate Earned on Average Total Assets Rate Earned on Average Stockholder’s Equity Rate Earned on Net Sales Earnings per Share Price-Earnings Ratio
Rate Earned on Average Total Equity This is how a business is increasing net income by using its total assets. Net Income After Federal Taxes - Average Total Assets = Rate Earned on Average Total Assets
Rate Earned on Average Stockholder’s Equity This calculation shows which is the best investment for their business. Net Income After Federal Taxes / Average Stockholder’s Equity = Rate Earned on Average Stockholder’s Equity
Rate Earned on Net Sales How much a business earns from net sales. This depends on the costs a business has also. Net Income After Federal Taxes / Net Sales = Rate Earned on Net Sales
Earnings per Share How much net income one share of common stock brings in during a fiscal period. Net Income After Federal Taxes / Shares of Capital Stock Outstanding = Earnings per Share
Price Earnings Ratio This calculation tells investors what kind of return they will get from a certain company’s stock. Market Price Per Share / Earnings per Share = Price Earnings Ratio
Efficiency Analysis Accounts Receivable Turnover Ratio Average Number of Days for Payment Merchandise Inventory Turnover Ratio
Accounts Receivable Turnover Ratio Shows how many times the average amount of accounts receivable is collected annually. Net Sales on Account / Average Book Value of Accounts Receivable = Accounts Receivable Turnover Ratio
Average Number of Days for Payment How many days that customers are given to pay their accounts. Days in Year / Accounts Receivable Turnover Ratio = Average Number of Days for Payment
Merchandise Inventory Turnover Ratio How many times a year merchandise inventory is sold. Cost of Merchandise Sold / Average Merchandise Inventory = Merchandise Inventory Turnover Ratio
Financial Strength Analysis Working Capital Current Ratio Acid-Test Ratio Debt Ratio Equity Ratio Equity per Share
Working Capital The amount of assets that a business has when all of their liabilities have been paid off. Total Current Assets - Total Current Liabilities = Working Capital
Current Ratio Shows assets in relation to the liabilities of a business. Total Current Assets / Total Current Liabilities = Current Ratio
Acid-Test Ratio Determines how well a business could pay off all of its liabilities immediately if it needed to. Total Quick Assets / Total Current Liabilities = Acid-Test Ratio
Debt Ratio Shows how much of a business’ assets are financed by borrowed capital. Total Liabilities / Total Assets = Debt Ratio
Equity Ratio The percentage of assets that a stockholder’s equity will provide. Total Stockholder’s Equity / Total Assets = Equity Ratio
Equity per Share How much of the total stockholder’s equity is in a single share of stock. Total Stockholder’s Equity / Shares of Capital Stock Outstanding = Equity per Share
In Conclusion... Some of these calculations may seem frustrating. (Click on video) However, with a little time and practice, it won’t be so confusing.
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