2. Calculations Lindsay Rodrigue Accounting 30 Ms. Lozinski May 29, 2001

3. In this presentation, various calculations used in Accounting 30 will be displayed and explained.

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. Efficiency Analysis Accounts Receivable Turnover Ratio Average Number of Days for Payment Merchandise Inventory Turnover Ratio

11. 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

12. 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

13. Merchandise Inventory Turnover Ratio How many times a year merchandise inventory is sold. Cost of Merchandise Sold / Average Merchandise Inventory = Merchandise Inventory Turnover Ratio

14. Financial Strength Analysis Working Capital Current Ratio Acid-Test Ratio Debt Ratio Equity Ratio Equity per Share

15. 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

16. Current Ratio Shows assets in relation to the liabilities of a business. Total Current Assets / Total Current Liabilities = Current Ratio

17. 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

18. Debt Ratio Shows how much of a business’ assets are financed by borrowed capital. Total Liabilities / Total Assets = Debt Ratio

19. Equity Ratio The percentage of assets that a stockholder’s equity will provide. Total Stockholder’s Equity / Total Assets = Equity Ratio

20. 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

21. 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.