Financial Ratio Formulas

Financial Ratio Formulas Prepared by Pamela Peterson Drake 1. Operating cycle InventoryInventoryNumber of days of inventory Average day's cost of goods soldCost of goods sold / 365== Accounts receivableAccounts receivableNumber of days of receivables Average day's sales on creditSales on credit / 365== Accounts payableAccounts payableNumber of days of payables Average day's purchasesPurchases / 365== Note: Cost ofEnding BeginningPurchases = goods sold inventory inventory ++ Number of days Number of daysOperating cycle of inventoryof receivables=+ purchases ofdaysofNumber sreceivable ofdaysofNumber inventory ofdays ofNumber cycle operatingNet += 2.

1. Operating cycle Inventory Inventory Number of days of inventory Average day's cost of goods sold Cost of goods sold / 365 == Accounts receivable Accounts receivable Number of days of receivables Average day's sales on credit Sales on credit / 365 == Accounts payable Accounts payable Number of days of payables

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  Financial, Cycle, Inventory, Cycle inventory inventory

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