Microsoft Office Tutorials and References
In Depth Information
Important Tools for Any Business
Figure 2.24
Establish a P&L to
understand direct
contribution and
breakeven sales.
Financial Ratios
The following financial ratios give an over view of the financial ratio’s description as well as
the formula description to create the ratio.
Current Ratio
The Current Ratio shows the ratio of current assets to current liabilities, as of the report date.
Gross Margin Percentage
Gross Margin Percentage indicates what percentage of each dollar of sales is left over after
paying the costs of sales amount for the period.
Days Sales in AR
Days Sales in AR shows how long it takes a business to collect receivables from its customers
for the period.
Allowance for Bad Debt As Percentage of AR
Allowance for Bad Debt as Percentage of AR shows what percentage of the accounts receivable
balance is considered uncollectable for the period.
Bad Debt As Percentage of Net Revenues
Bad Debt as Percentage of Net Revenues shows what percentage of revenue is considered
uncollectable for the period.
Inventory Turnover
Inventor y Turnover shows how quickly a business sells its inventor y by comparing the inventor y
balance to the cost of goods sold expense for the period on an annualized basis.
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