Accounting - Formulas with Calculator & Definition

There are several accounting formulas used to report the financial health of a person or business. These formulas are used to produce the Balance Sheet and Income Statement. Also known as Profit & Loss Statement. Balance Sheet is one of the main financial statements of a business. The other financial statements are the Income Statement and Cash Flow Statement

The calculators provided here are categorized in two sections, under Section -1 the calculators are of basic accounting formulas which will help to generate / analyze two main financial statements (Balance Sheet and Income Statement). However, to fully explore the financial health of person or business knowledge of accounting ratios are required. The calculators and brief of the most commonly ratios derived are covered hereunder in Section 2.

These calculators will surely help students by saving their very precious time spent in mathematical calculations during the practice. This saved time may be used for their more preparations and learning.

Section 1 - Calculator of Basic Accounting Formulas

Click / tap on button to view the Formula with Definitiont or functionality and to use Calculator. On click or tap of the button, the selected calculator will display and it will hide the calculator if already selected.

The Accounting Equation

Current Assets

Net Fixed Assets

Total Assets

Current Liabilities

Shareholder's Equity

Total Liabilities & Equity

Gross Margin

Operating Expenses

Income From Operations

Net Income

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Section 2 - Calculator to Calculate Ratio

Gross profit ratio

Net profit ratio

Operating profit ratio

Expense ratios

Operating (cost) ratio

Return on capital employed (ROI)

Earning per share

Dividends per share

Capital employed turnover ratio

Fixed assets turnover ratio

Working capital turnover ratio

Inventory turnover ratio

Debtors (receivables) turnover ratio

Debtors (receivables) collection period

Creditors turnover ratio

Average credit period

Current ratio

Quick ratio/Acid test ratio

Debt Equity Ratio

Debt to net worth

Debt vs. funds

Debt service ratio

Fixed assets ratio

Solvency (debt to total funds) ratio

Reserves to capital ratio

Capital gearing ratio

Proprietary ratio

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Maxutils.com Contents Highlights

Current Assets - Current assets are the sum of assets that will convert into cash in less than 12 months.( Current Assets = Cash + Accounts Receivable + Inventory + Prepaid Expenses)
Cash
Accounts Receivable
Inventory
Prepaid Expenses

Current Liabilities - Bills due within 12 months of the Balance Sheet date.(Current Liabilities = Accounts Payable + Accrued Expenses + Current Portion of Debt + Income Taxes Payable)
Accounts Payable
Accrued Expenses
Current Portion of Debt
Income Taxes Payable

Operating Expenses - The sum of expenses paid for developing and selling the product or service.(Operating Expenses = Sales & Marketing + Research & Development + General & Administrative)
Sales & Marketing
Research & Development
General & Administrative

Net Income - Net income is all income minus total expenses and costs.(Net Income = Income From Operations + Interest Income - Income Taxes)
Sales & Marketing
Research & Development
General & Administrative

Return on capital employed - measure narrows the focus to gain a better understanding of a company's ability to generate returns from its available capital base = (Net profit before interest, tax / Capital employed) x 100
Net profit
Interest
Tax
Capital employed

The Accounting Equation - The accounting equation is a vital formula. For it is the root of accounting (Worth = Assets - Liabilities)
Assets
Liabilities

Net Fixed Assets - Net fixed assets are the book value of fixed assets.(Net Fixed Assets = Fixed Assets @ cost - Accumulated Depreciation)
Fixed Assets @ cost
Accumulated Depreciation

Total Assets - The sum of all assets (Total Assets = Current Assets + Other Assets + Net Fixed Assets)
Current Assets
Other Assets
Net Fixed Assets

Shareholder's Equity - Shareholder's equity is the value of the company to its owners. Also called net worth. (Shareholder's Equity = Capital Stock + Retained Earnings)
Capital Stock
Retained Earnings

Total Liabilities & Equity - This is the total obligation plus worth of the entity. (Total Liabilities & Equity = Current Liabilities + Long-Term Debt + Shareholder's Equity
Current Liabilities
Long-Term Debt
Shareholder's Equity

Gross Margin - The left over amount after cost of goods sold are taken away from net sales.(Gross Margin = Net Sales - Cost of Goods Sold)
Net Sales
Cost of Goods Sold

Income From Operations - Net profit from the product or services sold.(Income From Operations = Gross Margin - Operating Expenses)
Gross Margin
Operating Expenses

Gross profit ratio - is the ratio of gross profit to net sales. The ratio thus reflects the margin of profit that a concern is able to earn on its trading and manufacturing activity = (Gross profit / Net sales) x 100
Enter Gross Profit
Enter Net Sales

Net profit ratio - expresses the relationship between net profit after taxes and sales. The ratio indicates what portion of the net sales is left for the owners after all expenses have been met = (Net profit / Net sales) x l00
Enter Net Profit
Enter Net Sales

Operating profit ratio - helps in determining the ability of the management in running the business =(Operating profit / Net sales) x 100
Enter Operating Profit
Enter Net Sales

Expense ratios - are calculated by dividing each item of expense or group of expenses with the net sales so analyse the cause of variation of the operating ratio =(Individual expenses / Net sates) x 100
Individual / group of expenses
Enter Net Sales

Dividend per share - is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued = Dividend amount / Number of equity shares
Dividend amount
Number of equity shares

The average credit period - ratio represents the number of days by the firm to pay its creditors = Average account payables / Net credit purchases per day
Average account payables
Net credit purchases per day

Acid test ratio - measures the ability of the business to pay its current liabilities in a real way. The ideal liquid ratio is suppose to be 1:1 i.e. liquid assets must be equal to the current liabilities. In case, this ratio is less than 1:1, it shows a very weak short-term financial position and in case, it is more than 1:1, it shows a better short-term financial position = Quick assets / Current liabilities
Quick assets
Current liabilities

The operating (cost) ratio - is determined by comparing the cost of the goods sold and other operating expenses with net sales. This ratio is a test of the efficiency of the management in their business operation = (Operating cost / Net sales) x 100
Operating cost
Enter Net Sales

Earnings per share - indicates the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability = net profit available for equity shareholders / Number of equity shares
Net profit available for equity shareholders
Number of equity shares

Capital employed turnover ratio - is used to calculate how efficiently the capital invested in the business is being used and how many times the capital is turned into sales = Cost of sales / Capital employed
Cost of sales
Capital employed

Fixed assets turnover ratio - establishes a relationship between net sales and net fixed assets. This ratio indicates how well the fixed assets are being utilised = Cost of sales or sales / Fixed assets
Cost of sales or sales
Fixed assets

Working capital turnover ratio - establishes a relationship between net sales and working capital. This ratio measures the efficiency of utilisation of working capital = Cost of sales or Net sales / Net working capital
Cost of sales or Net sales
Net working capital

Inventory turnover ratio - is a ratio between cost of goods sold and average stock. This ratio is also known as stock velocity or stock turnover ratio = Cost of goods sold / Average inventory
Cost of goods sold
Average inventory

Debtors turnover ratio - indicates the relation between net credit sales and average accounts receivables of the year. This ratio is also known as Debtors' Velocity = Annual net credit sales / Average accounts receivable
Annual net credit sales
Average accounts receivable

Debtor collection period - the period over which the debtors are collected on an average basis. It indicates the rapidity or slowness with which the money is collected from debtors = Accounts receivables / Net credit sales
Accounts receivables
Net credit sales per period

Creditors turnover ratio - indicates the speed with which the payments are made to the trade creditors. Shorter average payment period or higher payable turnover ratio may indicate less period of credit enjoyed by the business, may be due to the fact that either business has better liquidity position = Net credit purchases / Average creditors
Net credit purchases
Average creditors

Current ratio - shows ability of the business to pay its current liabilities. The ideal current ratio is suppose to be 2:1. In case, this ratio is less than 2:1, the short-term financial position is not supposed to be very sound and in case, it is more than 2:1, it indicates idleness of working capital = Current assets / Current liabilities
Current assets
Current liabilities

Debt Equity Ratio - shows the relationship between borrowed funds and internal owner's funds is measured by Debt-Equity ratio. This ratio is a measure of owner's stake in the business. This ratio is also known as debt to net worth ratio = Total long term debts / shareholder' funds
Total long term debts
shareholder' funds

Debt to net worth - also shows the relationship between borrowed funds and internal owner's funds is measured by Debt-Equity ratio. This ratio is a measure of owner's stake in the business = Total long term debt / Shareholder's funds = Total long term debt / Shareholder's funds
Total long term debt
Shareholder's funds

Debt to Total Funds - Ratios shows the proportion of long-term funds, which have been raised by way of loans. This ratio measures the long-term financial position and soundness of long-term financial policies = total long term debts / Total long term funds = total long term debts / Total long term funds
Total long term debts
Total long term funds

Debt service ratio - indicates the number of times interest is covered by the profits available to pay interest charges It is also known as Interest coverage ratio or debt service coverage ratio = Earnings before interest and taxes / Fixed interest charges
Earnings before interest and taxes
Fixed interest charges

Fixed assets ratio - indicates ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments = Net fixed assets / Long-term funds
Net fixed assets
Long-term funds

Solvency ratio - gives same indication as the debt-equity ratio as this is a variation of debt-equity ratio. This ratio is also known as solvency ratio. This is a ratio between long-term debt and total long-term funds = Total liabilities / Total assets
Total liabilities
Total assets

Reserves to capital ratio - establishes relationship between reserves and capital. Higher proportion of reserves shows financial soundness as 1. Unit shall be able to meet future losses as and when suffered. 2. Unit can grow, expand, diversify as it may desire = Reserves / Capital
Reserves
Capital

Capital gearing ratio - is the ratio between the capital plus reserves i.e. equity and fixed cost bearing securities. This ratio measures the extent of capitalization by the funds raised by the issue of fixed cost securities = Equity / Fixed interest hearing securities
Equity
Fixed interest hearing securities

Proprietary ratio - highlights the fact as to what is the proportion of Proprietors and outsiders in financing the total business. Proprietary ratio (also known as Equity Ratio or Net worth to total assets or shareholder equity to total equity)= Proprietor's funds / Total assets
Proprietor's funds
Total assets