Investment and Finance
The most frequently asked tax questions related to Investment and Finance
IRA - Basic characteristics
Asked Monday, October 16, 2000 by an anonymous userCPA Answer:
The annual $5,500 ($6,500 if age 50 or older) per spouse annual contribution is deductible on your tax return. Distributions at age 70 and a half are required. Contributions past age 70 and a half are not allowed. Premature distributions are subject to penalty. Distributions are taxable in your current tax return. IRA minimum distribution rules do apply.
What is the Turnover of Cash Liquidity ratio ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
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 Debt to Equity Ratio ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
This ratio illustrates the relationship between capital contributed by the creditors (such as banks and suppliers) which loan a business cash and the owners equity remaining in the business. It is commonly used to measure the degree of financial leverage of the business. The Total Long-Term Debt, divided by Stockholders' Equity = DTE Ratio. (Stockholders Equity = Total Assets, minus Total Liabilities).
What is the Rate of Return On Sales Ratio ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
Operating Income, divided by Net Sales = ROROS Ratio. This ratio illustrates how much net profit was derived from every dollar of sales. It helps indicate if the business is generating enough sales to cover fixed costs and leave an acceptable residual profit.
What is the Rate of Return on Assets Profitability ratio?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
This ratio is sometimes called the business' return on investment. It measures the overall effectiveness of management in generating profits with its available assets. Net Profits after taxes, divided by Total Assets = ROA.
What is the Average Collection Period ratio?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
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 userCPA Answer:
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 userCPA Answer:
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 the Fixed Asset Turnover Efficiency ratio ?
Asked Wednesday, October 11, 2000 by an anonymous userCPA Answer:
This Ratio measures the efficiency with which a business has been using its fixed or earning assets to generate sales. Sales, divided by Net Fixed Assets = FAT Ratio.