Essential Financial Accounting Formulas and Ratios
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Essential Financial Statement Formulas
- Stockholder Equity: Total Assets – Total Liabilities
- Retained Earnings: Net Income – Dividends Declared
- Net Income: Sales Revenue – Expenses
- Gross Profit: Sales Revenue – Cost of Goods Sold (COGS)
- Cost of Goods Sold (COGS) based on Rate: (1 – Gross Profit Rate) × Net Sales
Inventory Accounting Adjustments (LIFO and FIFO)
- Calculating LIFO Reserve: FIFO Ending Inventory Cost – LIFO Ending Inventory Cost
- Adjusting Balance Sheet from LIFO to FIFO Inventory: LIFO Reserve + LIFO Inventory
Accounting Estimates and Depreciation
Changing Accounting Estimates
- Book Value at Date of Change: Costs – Accumulated Depreciation
- New Remaining Useful Life: Original Life – Years Depreciated + Additional Years
- Depreciation