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...
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...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
One of the amounts used in determining the amount of interest to be capitalized when a company self-constructs certain long-term assets.
and Allowances and for Purchase Discounts.) When a company uses the perpetual inventory system, the general ledger account Inventory is continually being updated for all the purchases and sales of goods: The costs of...
receivable is critical for a company to pay its obligations when they are due. The calculation of the accounts receivable turnover ratio is: credit sales for a year divided by the company’s average amount of accounts...
A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average...
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
of the present and future situation. It is also wise to consider the financial ratios to be averages. For example, the sales are unlikely to have occurred evenly throughout the year. Therefore, the resulting number of...
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
SG&A, variable interest) average $8 per unit of product, and its selling prices average $20 per unit. The result is an average contribution margin of $12 per unit and an average contribution margin ratio of 60% ($12...
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...
What is the days' sales in accounts receivable ratio? Definition of Days’ Sales in Accounts Receivable The days’ sales in accounts receivable ratio (also known as the average collection period) tells you the...
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, the numerator is net __________. 9. To compute the earnings per share (EPS), you must deduct the cumulative preferred stock’s __________ requirement from the corporation’s net income. 10. Earnings per...
as follows: net annual sales divided by the average amount of working capital during the same year. Example of Working Capital Turnover Ratio To illustrate the working capital turnover ratio, let’s assume that a...
as property, plant and equipment (PPE) after deducting accumulated depreciation. Since net sales occurred throughout the year, you should divide the net sales by the average amount of net PPE during the year of the net...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
What is turnover? Definition of Turnover In accounting, the term turnover can have more than one meaning. In some countries turnover is used in place of sales. Turnover also pertains to certain financial ratios that...
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
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...
. The method in which the units in beginning inventory are treated as if they were started and completed in the current period is __________. Select... FIFO weighted average 10. Under which method are the units in...
ledger account that reports the cost of the goods that are on the factory floor. In this current asset account are the cost of the direct materials, direct labor and the allocation of manufacturing overhead for the...
? (If so, you are assuming a FIFO cost flow.) Would you match the $110 cost with the sale? (That’s the LIFO cost flow assumption.) If you would matched the average of $105, you would be using the weighted-average cost...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
would divide the counts of people who had left by the average number of filled positions in the company during that year. Let’s assume that on average the number of filled positions during the year were 20 full-time...
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...
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...
What is the return on assets ratio? Definition of Return on Assets Ratio The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average...
What is the total asset turnover ratio? Definition of Total Asset Turnover Ratio The total asset turnover ratio indicates the relationship between a company’s net sales for a specified year to the average amount of...
for each year of employment times the employee’s average monthly salary or wages during a three-year period prior to retirement. A hypothetical calculation for an employee retiring at age 65 might be 1% X 30 years of...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
securities + accounts receivable is divided by the company’s current liabilities. Mark as wrong Mark as right accounts receivable turnover ratio This ratio results when total credit sales for a year are divided by the...
. Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
This indicates (on average) how many days it takes to sell the merchandise held in inventory. To learn more, see Explanation of Financial Ratios.
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
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