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ACCOUNTING FORMULAS

ACCOUNTING FORMULAS - ACCOUNTING FORMULAS Financial Ratio...

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ACCOUNTING FORMULAS Financial Ratio Analysis Formulas: PROFITABILITY: Cost of goods sold to sales = [Cost of goods sold (\$)/Net Sales (\$)] x 100 = ?% Gross Income (or gross profit) to sales = [gross income (\$) / Net Sales (\$)] x 100 =?% Operating expenses to sales = [Operating expenses (\$) / Net Sales (\$)] x 100 = ?% The residual after deducting total operating expenses from gross income is: [Earnings before interest and taxes (\$) / Net Sales (\$)] x 100 = ?% Net Earnings (profit margin) to net sales = [Net Earnings (\$) / Net Sales (\$)] x 100 =?% RETURN ON EQUITY: Return on equity= [Net profit, usually after tax, before dividends (\$) / Average year’s equity] x 100 = ?% Average year’s equity= [Last year’s ending equity (\$)* + This year’s ending equity (\$)] /2 *if there’s no last year’s ending equity on the balance sheet, it is acceptable to use the current year’s equity as the average year’s equity EFFICIENCY/INVESTMENT UTILIZATION AGE OF ACCOUNTS RECEIVABLE:

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ACCOUNTING FORMULAS - ACCOUNTING FORMULAS Financial Ratio...

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