In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
to Calculate the Inventory Turnover Ratio The calculation for the inventory turnover ratio is: cost of goods sold for a year divided by average inventory during the same 12 months. A higher inventory turnover ratio is...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Why not use Sales in the Inventory Turnover Ratio? The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover Ratio is Cost of Goods Sold...
’ credit sales in accounts receivable; 2) inventory turnover, and the related ratio days’ cost of sales in inventory; 3) total asset turnover; and 4) fixed asset turnover. The accounts receivable turnover ratio and...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
or moment, there is an inconsistency between the numerator and the denominator. For example, the numerator in the inventory turnover ratio is the cost of goods sold for the 365-day year, while the denominator reflects...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
turnover ratio. days' sales in accounts receivable (or) average collection period This is the result of dividing 365 or 360 days by the accounts receivable turnover ratio. Mark as wrong Mark as right inventory...
's inventory balance averaged $100,000; its sales were $500,000; and its cost of goods sold was $400,000. The company’s inventory turnover ratio for that year was __________ 4 Inventory turnover ratio = cost of...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
are FOB __________. 6. FIFO is an inventory __________ __________ assumption. 7. When a company uses FIFO, its inventory might be reported at the lower of __________ or __________ __________ __________. 8. The inventory...
consisting of current liabilities of $950,000 + noncurrent liabilities of $1,250,000. AMP's total assets were given at $3,000,000. Therefore, AMP's debt to total assets ratio on December 31 was $2,200,000 to...
. ITR = cost of goods sold divided by average inventory Cost of goods sold (COGS) in this question = sales X 70% COGS = $600,000 X 70% = $420,000 ITR = $420,000 divided by the average inventory of $100,000 Inventory...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
assume that a company has net sales of $800,000 and its cost of goods sold is $600,000. As a result, its gross profit is $200,000 (net sales of $800,000 minus its cost of goods sold of $600,000) and its gross margin...
This ratio relates the costs in inventory to the cost of the goods sold. To learn more about this ratio, see Explanation of Financial Ratios.
deducting the cost of goods sold and all other expenses including income tax expense. The calculation is: Net Income after Tax divided by Net Sales. The profit margin ratio is most useful when it is compared to 1) the...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
Ratio The inventory turnover ratio indicates how many times a company’s inventory turns over in a year. The calculation is: cost of goods sold for a year divided by the average inventory during the same year. Since a...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
, as it is also the average cost to retail ratio. The following caculation pertains to the period of January 1 to January 28: *$20,000 at retail times $27,000/$36,000 $16,000 Wrong. See the calculations for $15,000....
of the inventory is less than the actual cost of the inventory, it is often necessary to reduce the inventory amount. To learn more about inventory, see our Inventory and Cost of Goods Sold Outline. 8. The inventory...
by the creditors, and the owners are providing 60% of the assets’ cost. Generally, the higher the debt to total assets ratio, the greater the financial leverage and the greater the risk. How To Be Used As with all...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
The percentage resulting from dividing dividends per share by earnings per share.
The mathematical result of sales revenues divided by average total assets during the period of the sales.
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
The ratio of total liabilities to total assets. For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).
See gross profit percentage.
See Explanation of Financial Ratios.
The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It...
The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...
Featured Review
"I am the owner of a small bookkeeping/tax firm, and stumbled across AccountingCoach several years ago. I immediately recognized its value and became a PRO user. I must say, I find this software is excellent for learning and great for when you need a refresher on a specific accounting topic. The explanations are clear and concise. I also like that you can choose the learning method that works best for you—the site offers video training, flashcards, PDF/cheat sheets, and quick tests. Additionally, at the PRO level, it offers 10 accounting and bookkeeping certificates. I highly recommend AccountingCoach PRO to anyone in the field as a valuable resource, whether you are just starting or are a seasoned professional." - Donna R.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
Learn More About Harold
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: