Financial Statements
The most frequently asked tax questions related to Financial Statements
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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 Times Interest Earned Ratio as it relates to Financial Statements?
Asked Wednesday, October 11, 2000 by an anonymous user
The Times Interest Earned Ratio measures the business' ability to make contractual interest payments. The higher the ratio, the better able the business is to fulfill its interest obligations. Earnings before interest and taxes, divided by Interest = Times Interest Earned Ratio.
What is the Gross Profit Margin as it relates to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous user
The gross profit on inventory is divided by the average profit of the inventory. Low end items may be marked up 500% while a high end is only 30%. Use the average profit across all inventory items. If the average is 10, which means for every dollar you invested, you earned $10 more in profit.
What is the Debt Ratio as it relates to Financial Statements?
Asked Wednesday, October 11, 2000 by an anonymous user
The Debt Ratio measures the proportion of total assets financed by the business' creditors. The higher the ratio, the greater the amount of other people's money being used in an attempt
to generate profits. Total Liabilities, divided by Total assets = Debt Ratio.
What is the Net Profit Margin, as it relates to Financial Statements ?
Asked Wednesday, October 11, 2000 by an anonymous user
The Net Profit Margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted. The higher the business' net profit margin the better. "Good" net profit margins differ considerably across industries. Net profits after taxes, divided by Sales = Net Profit Margin.
What is the SEC ?
Asked Wednesday, October 11, 2000 by an anonymous user
The SEC is the abbreviation for the Securities and Exchange Commission. It is the federal regulatory body that governs the sale and listing of securities.
What is a Publically-held Corporation ?
Asked Wednesday, October 11, 2000 by an anonymous user
A publically-held corporation is a corporation whose stock is traded on either an organized securities exchange or on the over-the-counter exchange, or those with more than $5 million in assets and 500 or more stockholders.
Within Financial Statements , what are some examples of assets ?
Asked Tuesday, October 10, 2000 by an anonymous user
Assets include: Cash, land, buildings, merchandise, equipment and anything the business owns that has monetary value.
Within Financial Statements , what are some examples of current assets ?
Asked Tuesday, October 10, 2000 by an anonymous user
Current assets include: Cash, petty cash, accounts and notes receivable, inventories and any other item that can be converted into cash within one year.
