Liz Kolar, CPA Exam expert, accounting professor, and Surgent CPA Review co-founder, provides CPA candidates with helpful tips on the key ratios you need to know to pass the CPA Exam. In this 3 minute video, Liz gives you some simple ways to easily remember what some of the key ratios are, how to calculate them, and which ratios you simply must memorize before you start sitting for any of the CPA Exam sections.
In this short video, Liz will cover:
-"Return on" ratios like return on equity or return on assets. Return on means net income divided by.
-Turnover ratios. Turnover is sales divided by what you’re turning over. So inventory turnover would be cost of goods sold divided by average inventory.
-Ratios involving the word “to” such as debt to equity ratio. In these ratios, "to" means divided by. So debt to equity would be debt divided by equity, debt to assets would be debt divided by assets.
-Ratios involving the word margin. Margin usually means divided by sales. So profit margin would be operating profit divided by sales.
Lastly two formulas you have to memorize: earnings per share and times interest earned (TIE).
Earnings per share is net income minus the current preferred dividend, divided by the weighted average of the common shares outstanding.
You may get questions on earnings per share on BEC, FAR, or even AUD, so you have to memorize it.
Lastly TIE, or Times Interest Earned. This is EBIT divided by interest in taxes. A simple way to remember is earnings before interest in taxes, divided by interest.
Watch Liz explain how getting these key ratios down will help you pass the CPA Exam.
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29 сен 2024
