Chapter 14 Formula Sheet Liquidity Ratios   Acid-test ratio…

Chаpter 14 Fоrmulа Sheet Liquidity Rаtiоs   Acid-test ratiо = (Current assets – Inventory – Prepaid expenses) ÷ Current liabilities   Current ratio = Current assets ÷ Current liabilities Debt Management Ratios   Debt-to-equity ratio = Total liabilities ÷ Stockholders’ equity   Equity multiplier = Average total assets ÷ Average stockholders’ equity   Times interest earned ratio = Earnings before interest expense and income taxes ÷ Interest expense Asset Management Ratios   Inventory turnover = Cost of goods sold ÷ Average inventory balance   Average sale period = 365 days ÷ Inventory turnover ratio   Accounts receivable turnover = Sales on account ÷ Average accounts receivable balance   Average collection period = 365 days ÷ Accounts receivable turnover ratio   Accounts payable turnover = Purchases on account ÷ Average accounts payable balance   Average payment period = 365 days ÷ Accounts payable turnover ratio   Operating cycle = Average sale period + Average collection period   Cash conversion cycle = Average sale period + Average collection period – Average payment period   Total asset turnover = Sales ÷ Average total assets Profitability Ratios   Gross margin percentage = Gross margin ÷ Sales   Net profit margin percentage = Net income ÷ Sales   Return on equity = Net income ÷ Average stockholders’ equity   Return on total assets = (Net income + [Interest expense × (1 – Tax rate)]) ÷ Average total assets