Acid Test Ratio

Cash + Short Term Investments + A/R

Current Liabilities

Dividend Yield Annual cash dividends

per share/market price share

flows, Subtract initial amt invested from

of cash flows

Equity Ratio Total Equity/Total Assets

OH (predet) Est OH/Activity Base

Begin Cash Bal + Budget Cash Bal

Cash Disbursed = Prelim Cash Bal

FIFO if is given multiply by beg

units
Future Value of a Single Amount
F= P * (1 + i)^ P = Pres Value F =
Future Value
I = Rate of Interest per Period ^ = # of
Periods

Operating Budget
Inventory to purchase=Budget
Ending+Budget Cost for period
Budget beginning
Express in # by multiplying units to
purchase x Cost p/u

A/R Turnover Net Sales/Avg A/R

(Divide by 2 for Avg)
Basic Earnings Per Share Net Income
Pref Dividens/Weight avg Comshares
outstanding
Break-even Analysis
B/E Units = Fixed Cost/CM
B/E $s = Fixed Cost/CM Ratio
B/E Composite = FC/CM per comp unit

Goods in Process
COGM = TMfgC + BGIP EGIP

Computing Sales for Target Income

$ Sales @ Tgt after-tax = (FC + Tgt
pretax)/CM Ratio
Unit Sales @ Tgt after-tax = (FC + Tgt
pretax)/CM

change in cost/change in units.

Contribution Margin
CM p/u = Sales p/u vc p/u ($)
CM Ratio = CM/Sales price per unit
Cost of Goods Manufactured
= TMfgC + Beg GinP Ending GinP
Cost of Goods Sold
COGS = BegFG + COGM EndFG
Cost Variance (Direct Materials) =
Price Variance Qty Variance
(AP-SP) x AQ minus (AQ-SQ) x SP
not given AP = ttl actl DM / act DM qty
not given SQ = actual units x std
quantity
Cost Variance (Direct Labor) =
Rate Var Efficiency Variance
(AR-SR) x AH minus (AH-SH) x SR
Current ratio Curr assts/ Curr Liab
Days Sales in Inventory End
Inventory/ COGS x 365

High Low Method to find VCost pUnit

VCU = (Hi Cost Low Cost)/(Hi Unit

Low Unit)
Ttl Cost = FC + (VC per Unit X # Units)
Gross Margin Ratio Net Sales
COGS/Net Sales
Internal Rate of Return (IRR)
Calc period = Initial Cost/cash inflow
Use PV of annuity table to locate row of
# = to period in projects life IRR % is the
rate of column where PV is found
Inventory Turnover COGS/Avg Inven
Keep or Replace Equipment
1. Cost to buy new equipment (negative
number since that is money you had to
spend)
2. Add the cash received on trade-in
3. Add the reduction in variable costs
(vc x # of years reduction)
Make or Buy
DM + DL + OH = incremental costs
If incremental cost > cost to buy buy
the product
If incremental cost < cost to buy make
the product

Debt Ratio Total Liabilities/Total Assets

Margin of Safety
($) = Expected Sales B/Even Sales
Margin of Safety (%) = (Exp Sales
Break Even Sales)/Expected Sales

Debt Equity Ratio Total

Liabilities/Total Equity

Net Income = Sales COGS Op Exp

Gen/AdminExp Income Tax

Degree of Operating Leverage (DOL)

DOL = CM (dollars) / pre-tax income

Net Present Value

Use tables to apply % discount net cash

Days Sales Uncollected A/R net/Net

Sales x 365

Payback Period Even

Cost of Investment/Annual Net Cash
Flow
Present Value of a Single Amount
P= F/(1 + i)^ P = Pres Value F = Future
Value
I = Rate of Interest per
Price-earnings ratio Market price per
common share/earnings per share
Profitability Index NPV/investments
Rate of Return
Annual After tax net income/Annual
Average investment (Beg book
value +End Book Value /2)
Raw Materials
= Beginning RM + Purchased RM - End
RM
Residual Income
= Net Operating Income (Minimum
Required Return on Assets X Average
Operating Assets of the Segment)
Return on Common Stockholders
Equity =
NInc Pref Div/ Avg Com S Equity
Return on Total Assets Net
income/Avg Total Assets
Sensitivity Analysis Rev B/E in $
= Revised FC / Rev CM Ratio
Sensitivity Analysis B/E Composite
Units = FC / CM per Comp Unit
Profit Margin Ratio = Net Income/Net
Sales
Rework or Scrap
1. Revenue of each product-scrap &
rework (price x units)
2. Subtract rework (rework price x units)
3. Subtract opp cost not making units
(units x sell price) (units x sunk cost)

Sales Mix
Calculate CM or CM per MH to det
which is more profitable
Sales Trend Analysis/Base x 100%
Segment subtract the AVOIDABLE cost
from the revenue.If Segments revenue
is less that its total AVOIDABLE
expenses, segment e eliminated.
Sell or Process Steps
1. Calcrev of units
(price x units)
2. Subtrrev if sold as is (sell price x
units)
3. Subtract cost to process further
(incremental cost x units)
Times Interest earned Income b4
interest expected & income tax / interest
expense
Total Asset Turnover Net Sales/Avg
Total Assets
Total Cost Method:
Determine the total costs (production &
non-production), total cost per unit, the
markup per unit and the selling price pu
Total Manufacturing Costs
= DM + DL + FOH
Variable Cost flexible budget =
VC/predicted units x actual units
Additional Units
1. Determine full capacity (current
units/capacity stated) = full capacity
2.Determine idle capacity (full capacity
from #1 If have idle capacity is > than
additional units continue
3 Determine incremental benefit
(price of addtl units VC) If
positive, do the order If negative,
Weighted Average CMor WACM
1.Unit CM = Sales Price VC
2 % of Sales Mix = Ratio / Ttl of Ratios
3 Weighted Unit CM = Unit CM * % of
Sales Mix
4. Ttl Weig Unit CM = Total of Weighted
Unit CMs Then solve for:
WACM = CM per Unit * Sales Mix
(% of each unit of CM added to each
other to get a total sales mix)
Weighted Average of B/E Units = FC /
WACM