The Wall Street MBA, Second Edition, 2nd Edition

Appendix CSUMMARY FORMULAS

Here is a handy guide to the main formulas found in the book.

ACTIVITY ANALYSIS

Use the following formulas to evaluate revenues and output generated by a firm’s assets:

Inventory turnover days = 365/(cost of goods sold/average inventory)

Accounts receivable turnover days = 365/(credit sales/average accounts receivables)

Accounts payable turnover days = 365/(purchases/average accounts payable)

LIQUIDITY ANALYSIS

Use the following formulas to measure the adequacy of the firm’s cash resources to meet its near-term cash obligations:

Current ratio = current assets/current liabilitiesQuick ratio = (cash + marketable securities +accounts receivable)/current liabilities

Cash ratio = (cash + marketable securities)/current liabilities ...