Week 3 Formulas
Here are some formulas that will be helpful in week 3 related to topics of cash flows and financial
analysis. Remember, equations can be rearranged to solve for the variable of interest. Please explore
websites (resources listed under "Cyber Cafe") for a deeper understanding of the equations and
concepts.
Quick ratio = Current Assets - Inventory / Current liabilities
Net profit margin=Net Income/Sales
Debt to equity ratio = Total Debt/Total Equity
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Total Debt is calculated by multiplying Total Assets by the debt ratio.
Total Equity is calculated by subtracting Total Debt from Total Assets.
ROA = Profit margin x Total assets turnover
Accounts receivable turnover = Net Sales / Accounts Receivables
Gross profit margin = Sales- COGS/Sales
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Inventory turnover ratio = COGS/Inventory
Times Interest Earned is EBIT/Interest Expense