Free tool
Enter figures from a balance sheet and income statement and get the ratios an accounting course tests: working capital, current and quick ratio, debt-to-equity, gross margin, receivables and inventory turnover. Fill in only what you have; each ratio appears when its inputs are there.
Built for Financial AccountingCost of goods sold above is also used for inventory turnover.
Enter some figures.
Ratio questions are easy once the formulas are automatic. Encodr keeps the liquidity, margin and turnover formulas on a spaced schedule, with the course definitions.
Get started freeLiquidity ratios use only current accounts. Working capital = current assets - current liabilities,
current ratio = current assets / current liabilities and
quick ratio = (cash + marketable securities + net accounts receivable) / current liabilities. The quick ratio leaves out inventory and prepaid items.
Gross profit margin ratio is (net sales - cost of goods sold) / net sales, shown as a percentage.
Turnover ratios measure speed. Receivables turnover = net credit sales / average accounts receivable and
days' sales in receivables = 365 / turnover. Inventory turnover = cost of goods sold / average inventory and
days' sales in inventory = average inventory / (COGS / 365). Average means (beginning + ending) / 2. Debt-to-equity is
total liabilities / total stockholders' equity. Net profit margin, return on assets and return on equity use net income over net sales, total assets and
equity respectively; this tool uses the year-end figures you enter, and they are the common textbook forms rather than something the course cards define.
Worked example: current assets of $120,000 against current liabilities of $80,000 give a current ratio of 120,000 / 80,000 = 1.50. Cash $30,000 + securities $10,000 + receivables $40,000 over $80,000 is a quick ratio of 1.00. Net sales $500,000 less COGS $300,000 is a gross margin of 40.0%. Every ratio is explained in financial ratios explained, and the whole course is in the free Financial Accounting deck. A rule of thumb in the course text is a current ratio of about 1.5 to 2, which varies by industry.
Financial ratios explained with the course formulas: working capital, current and quick ratio, margins, turnover and days sales, with worked numbers.
What a first financial accounting course covers, unit by unit, from the accounting equation and journal entries to bonds, stock and the statement of cash flows.
How to study for financial accounting: make debits and credits automatic, learn entries as templates, drill the calculation units and keep old units in review.
Debits and credits explained from scratch: what each side means, which accounts each increases, and six balanced journal entries checked with a trial balance.
Enter a discount rate and a series of cash flows to get both the net present value and the internal rate of return.
Open tool →Enter fixed costs, price per unit, and variable cost per unit to see exactly how many units - and how much revenue - it takes to break even.
Open tool →Midpoint price elasticity of demand from two prices and two quantities: elastic, inelastic or unitary, plus the total revenue effect.
Open tool →Inflation rate from CPI, nominal to real value, GDP deflator and real interest rate, with the formulas shown.
Open tool →Full depreciation schedule by straight-line, double-declining-balance or units-of-production, with book value never below salvage.
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