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13 Cards in this Set
- Front
- Back
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What is Gross Profit on Sales and the formula used to calculate it?
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Gross Profit on Sales
Gross profit on sales measures sales minus the cost of goods sold. GP (Gross Profit) = S (sales) - CG (cost of goods) Gross profit on sales compares gross profit to sales. Gross Profit on Sales - cost of goods = net profit on sales GPS - CG = NPS Gross Profit on Sales = Gross Profit / Sales GPS = GP/S |
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What is Profit Margin and the formula used to calculate it?
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Profit margin measures profit margin as a percentage of sales. This is often used an
estimate for future profits. Profit Margin = Net Income / Sales |
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What is Return on Equity and the formula used to calculate it?
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Return on equity is widely used to measure a return on invested money.
Return on Equity = Net Income / Average Equity |
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What is Earnings Per Share and the formula used to calculate it?
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The earnings per share is used by investors to determine the profit of one share of common stock.
Earning Per Share = Net Income / Common Shares Outstanding |
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Describe Net Present Value and how it can be used.
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Net present value (NPV) is a method of evaluating the cost and profitability of a major project (building a new facility, investing in development of new product, etc.). Essentially, it helps find the present value in "today's dollars" of the future net cash flow of a project.
If the NPV is greater than the cost, the project will be profitable. If multiple projects ar being considered, NPV can be calculated for both, and assist in determining which project offers more profitability. The end result of NPV is a comparison of that the present value of future earnings with the amount of money needed to implement the project. |
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What is Current Ratio and the formula used to calculate it?
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Current ratio examines the possibility of financial difficulty in the future, along with a
company’s ability to access cash (also called liquidity) over the short-term. Current Ratio = Current Assets / Current Liabilities CR = CA / CL |
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What is Quick Ratio and the formula used to calculate it?
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Quick ratio examines the same thing as the current ratio, except quick ratio considers the value of inventories and prepayments.
Quick Ratio = Current Assets – Inventories – Prepayments / Current Liabilities QR = CA - I - P / CL |
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What is Long-term Debt Ratio and the formula used to calculate it?
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Long-term debt ratio measures how much capital is made up of debt. The higher the debt ratio the higher the risk for investors and creditors.
Long-term Debt = (Long-term debt + value of leases) / (Long-term debt + value of leases + equity) |
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A fee or percentage allowed to a sales representative or an agent
for services rendered |
Commissions
commissions = sales x percentage rate |
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An excess or bonus beyond what is expected or due
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Interest
interest = principal x rate x time |
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The compound interest formula
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M = P( 1 + i )n
original $amount(1+interest rate) to the power or compounding periods |
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The simple interest formula
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dollar amount x interest rate x length of time (in years)= amount earned
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Cost of Goods Formula
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Equal to the beginning inventory + (plus) the cost of goods purchased (during a time period) - (minus) the ending inventory.
COG = BI + COGP - EI |
