Accounting Formulas 1. Gross Profit = Sales - Cost of Goods Sold 2. Gross Profit Margin = (Gross Profit / Sales) x 100 3. Operating Profit = Gross Profit - Operating Expenses 4. Operating Profit Margin = (Operating Profit / Sales) x 100 5. Net Profit = Operating Profit - Taxes and Interest 6. Net Profit Margin = (Net Profit / Sales) x 100 7. Return on Investment (ROI) = (Gain / Cost) x 100 8. Return on Equity (ROE) = (Net Profit / Shareholder Equity) x 100 9. Asset Turnover = Sales / Total Assets 10. Inventory Turnover = Cost of Goods Sold / Average Inventory 11. Days Sales Outstanding (DSO) = Accounts Receivable / Sales x Number of Days 12. Days Inventory Outstanding (DIO) = Inventory / Cost of Goods Sold x Number of Days 13. Current Ratio = Current Assets / Current Liabilities 14. Quick Ratio = (Current Assets - Inventory) / Current Liabilities 15. Debt-to-Equity Ratio = Total Debt / Shareholder Equity 16. Earnings Per Share (EPS) = Net Profit / Number of Shares 17. Price-Earnings Ratio (P/E Ratio) = Stock Price / EPS 18. Break-Even Point (BEP) = Fixed Costs / (Selling Price - Variable Costs) 19. Margin of Safety = (Sales - BEP) / Sales 20. Cost of Goods Sold (COGS) = Direct Materials + Direct Labor + Overheads 21. Operating Leverage = (Operating Profit / Sales) x (Sales / Fixed Costs) 22. Financial Leverage = (Net Profit / Operating Profit) x (Operating Profit / Sales) 23. Return on Assets (ROA) = Net Profit / Total Assets 24. Return on Capital Employed (ROCE) = EBIT / (Total Assets - Current Liabilities) 25. Residual Income (RI) = Net Profit - (Total Assets x Cost of Capital) 26. Economic Value Added (EVA) = Net Profit - (Total Assets x Cost of Capital) 27. Cash Conversion Cycle = DIO + DSO - Days Payable Outstanding (DPO) 28. Asset Utilization = Sales / Total Assets 29. Profitability Index (PI) = Present Value of Future Cash Flows / Initial Investment 30. Accounting Rate of Return (ARR) = Average Annual Profit / Average Investment 31. Payback Period = Initial Investment / Annual Cash Inflows 32. Discounted Payback Period = Initial Investment / Discounted Cash Inflows 33. Net Present Value (NPV) = Present Value of Future Cash Flows - Initial Investment 34. Internal Rate of Return (IRR) = Discount Rate that sets NPV to zero 35. Cost of Capital = Weighted Average of Debt and Equity Costs