Formulas to Know! Chapter 1 Assets = Liabilities + Stockholders' Equity Chapter 2 Free Cash Flow = Cash Provided by Operations Capital Expenditures Cash Dividends Profitability Ratios: measures of the income or operating success of a company for a given period of time Earnings per Share (EPS) = Net Income Preferred Stock Dividends Average <a href="/keyword/common-shares-outstanding/" >common shares outstanding</a> Liquidity Ratios: measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash Working Capital = Current Ratio = Current Assets Current Liabilities __Current Assets__ Current Liabilities Solvency Ratios: measures of the ability of the company to survive over a long period of time Debt to Total Assets Ratio = Total Liabilities Total Assets Chapter 4 Interest = Face Value Of Note x Annual Interest Rate x Time (in terms of one year) Chapter 5 <a href="/keyword/gross-profit/" >gross profit</a> = <a href="/keyword/gross-profit/" >gross profit</a> Rate = Sales Cost of <a href="/keyword/goods-sold-gross/" >goods sold gross</a> Profit Net Sales Net Income Net Sales Profit margin ratio = Note: you do NOT need to know how to calculate depreciation for the exam Beginning inventory Add: Cost of Goods Purchased Purchases Less: Purchase Returns &amp; Allowances Purchase Discounts____________ Net Purchases Add: Freight-in____________________ Cost of Goods Available for Sale - Ending inventory_________________ Cost of Goods Sold (under a periodic system) Sales Revenues Sales Returns &amp; Allowances Sales Discounts___________ Net Sales Sales Revenue - Cost of Goods Sold________________ <a href="/keyword/gross-profit/" >gross profit</a> - Operating Expenses________________ Net Income (or Income from Operations)