Financial Statements
The most frequently asked tax questions related to Financial Statements
For Tax Payers
Need professional help with a specific tax issue or have general tax questions? Ask a CPA is the easiest way to get advice from a licensed accountant in our network.
Ask a Tax QuestionFor Accountants
Provide answers to tax questions and introduce your practice to new potential clients. Build your CPAdirectory profile and earn reputation points.
Answer Tax QuestionsWhat is the Turnover of Cash Liquidity ratio ?
Asked Wednesday, October 11, 2000 by an anonymous user
The Turnover of Cash Liquidity ratio evaluates the adequate means that a company has to finance sales without struggling to pay for materials or goods that the company is buying. Net sales, divided by working capital = TOC Ratio. (Working capital = current assets, minus current liabilities). The generally accepted standard is 5 or 6 times working capital, but may differ depending on your industry.
What is the Return on Equity Profitability ratio ?
Asked Wednesday, October 11, 2000 by an anonymous user
The ROE measures the return earned by the owners' (preferred and common stockholders) investment in the business. Net Profit after taxes divided by stockholders Equity = ROE.
What is the Average Collection Period ratio?
Asked Wednesday, October 11, 2000 by an anonymous user
This ratio illustrates the average number of days it takes to collect cash from the business' credit sales. Accounts Receivable, divided by (Annual Sales, divided by 365)= the Average Collection Period. The Average Collection Period is meaningful only in relation to the business' credit terms.
What is the Average Payment Period Ratio ?
Asked Wednesday, October 11, 2000 by an anonymous user
The ratio illustrates the average amount of time needed to pay the companies accounts payables. The ratio is calculated by taking the Accounts Payable amount divided by (Annual purchases divided by 365)
What is the Inventory Turnover Activity ratio ?
Asked Wednesday, October 11, 2000 by an anonymous user
This ratio illustrates how many times your initial inventory is replaced in a year. Cost of Goods Sold, divided by Average Inventory = IT Ratio. Also, Days in the year, divided by the Inventory Turnover Ratio = Number of days in Inventory Ratio. Faster turnovers are viewed as a positive trend. The result is meaningful only when compared to other businesses in the same industry or the same business' past inventory turnover.
What is Earnings Per Share (EPS) as it relates to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous user
The EPS represents the number of dollars earned on behalf of each outstanding share of common stock. Earnings available for common stockholders divided by the number of shares of common stock outstanding = EPS. EPS is an amount earned on behalf of each share outstanding. It does not represent the amount of earnings actually distributed to shareholders.
What is the Price / Earnings ( P/E ) Ratio ?
Asked Wednesday, October 11, 2000 by an anonymous user
The P/E Ratio reflects the amount investors are willing to pay for each dollar of the business's earnings. The higher the P/E Ratio, the greater the investors’ confidence in the firm. The P/E ratio represents the "multiple" that the stock market places on the earnings of a company. Market price per share of common stock divided by Earnings per share of common stock = P/E Ratio.
What is a Dividend Yield as it applies to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous user
The Dividend Yield is the relationship between cash dividends paid to shareholders and the market price per share of common stock. Dividends per share of common stock, divided by the Market price per share of common stock = Dividend Yield.
What is the Total Asset Turnover as it relates to Financial Statements?
Asked Wednesday, October 11, 2000 by an anonymous user
The Total Asset Turnover indicates the efficiency with which the business uses all of its assets to generate sales. Sales, divided by Total assets = TAT.