Basic Accounting & Finance Formulas

 Basic Accounting & Finance Formulas

1. Gross Profit = Sales - Cost of Goods Sold 2. Gross Profit Margin = (Gross Profit + Sales) × 100 3. Operating Profit = Gross Profit - Operating Expenses 4. Operating Profit Margin = (Operating Profit + Sales) x 100 5. Net Profit Operating Profit - (Taxes + Interest) 6. Net Profit Margin = (Net Profit + Sales) × 100 7. Return on Investment (ROI) = (Gain Cost) × 100 8. Return on Equity (ROE) = (Net Profit ÷ Shareholders' Equity) × 100 9. Asset Turnover = Sales + Total Assets 10. Inventory Turnover = Cost of Goods Sold ÷ Average Inventory 11. Days Sales Outstanding (DSO) = (Accounts Receivable Sales) × Number of Days 12. Days Inventory Outstanding (DIO) = (Inventory ÷ Cost of Goods Sold) x Number of Days 13. Current Ratio = Current Assets + Current Liabilities 14. Quick Ratio = (Current Assets - Inventory) + Current Liabilities 15. Debt-to-Equity Ratio = Total Debt Shareholders' Equity 16. Earnings Per Share (EPS) = Net Profit + Number of Shares 17. Price-to-Earnings (P/E) Ratio = Stock Price + EPS 18. Break-Even Point (BEP) = Fixed Costs (Selling Price - Variable Cost per Unit) 19. Margin of Safety = ((Sales - BEP) Sales) x 100 20. Cost of Goods Sold (COGS) = Direct Materials + Direct Labor + Overheads 21. Operating Leverage = % Change in EBIT + % Change in Sales 22. Financial Leverage = EBIT + EBT 23. Return on Assets (ROA) = Net Profit Total Assets 24. Return on Capital Employed (ROCE) = EBIT÷ (Total Assets - Current Liabilities) 25. Residual Income (RI) = Net Profit (Total Assets × Cost of Capital) 26. Economic Value Added (EVA) = NOPAT- (Capital Employed × WACC) 27. Cash Conversion Cycle (CCC) = DIO + DSO -Days Payable Outstanding (DPO) 28. Asset Utilization = Sales Total Assets 29. Profitability Index (PI) = PV of Future Cash Flows + Initial Investment 30. Accounting Rate of Return (ARR) = (Average Annual Profit Average Investment) × 100 31. Payback Period = Initial Investment Annual Cash Inflows 32. Discounted Payback Period = Initial Investment + Discounted Cash Inflows 33. Net Present Value (NPV) = PV of Future Cash Flows - Initial Investment 34. Internal Rate of Return (IRR) = Discount Rate where NPV = 0 35. Cost of Capital (WACC) = Weighted Average of Cost of Debt and Equity