Understanding Accounting Vouchers, Books, and Financial Ratios
Accounting Vouchers
Proof of Income:
These are used in transactions related to entering the company’s background.
Proof of Outflows:
These are used in transactions related to the outflows of the company.
Other Transactions:
These are used in other transactions made by the company.
The information contained in the proof is the origin for registration in the books, and they should also make accounting reports.
Books of Accounts: Purchases and Sales Assistants
These books are records of journal and subsidiary aims for repetitive operations of the same nature.
The buying and selling books group these movements of a period, so as to avoid accounting for each of them. The total seats allow for centralization in the journal.
Liquidity Ratios
Current Ratio
This ratio is expressed in time or the number of times current assets cover current liabilities. The higher the current ratio, the greater the company’s ability to pay its bills. However, this reason does not consider the liquidity of individual component assets.
Formula:
Assets / Current Liabilities
Acid Test Ratio (Quick Ratio)
It is similar to the current ratio except that it excludes inventories, which are probably one of the least liquid current assets. The reason is focused on effective, feasible values of accounts receivable in relation to circulating obligations and thus provides a more refined measure of liquidity than the current ratio.
Formula:
(Current Assets – Inventories) / Current Liabilities
Other Liquidity Analysis
When you suspect a lack of balance or problems in several components of current assets, financial analysts evaluate some specific liquidity of assets.
Accounts Receivable
This item is considered a liquid asset only when it can be charged a reasonable amount of time.
Ratio of Average Collection Period
Its result will be the average number of days accounts receivable remain outstanding.
Formula:
(Accounts Receivable x Days in Year) / Annual Sales
Turnover Ratio of Accounts Receivable
This index will show how many times a year the accounts receivable rotate and is directly related to the average collection period.
Formula:
Annual Sales / Accounts Receivable
Inventory Liquidity
You can calculate the inventory turnover ratio as an indicator of the liquidity of the stocks.
Formula:
Cost of Goods Sold / Average Inventory
Debt Ratios
It is the relationship that exists within the capital structure between the resources provided by third parties and equity. The reason we obtained indicates the proportion of funding contributed by creditors and how much its own funds. This index will be delivered as information to creditors could fall to as assets before they suffer losses.
Formula:
Total Liabilities / Equity (Equity)
Profitability Ratios
Operating Income to Sales
Is the return obtained from the operation of the company for every $ they sell.
Formula:
Operating Income / Sales
Sales Result (Profit Margin)
Is the return received for every $ that is sold, also called profit margin.
Formula:
Total Score / Sales
Result Heritage (Return on Equity)
Is the return received for every $ that investors or owners of capital invested in the company including retained earnings.
Formula:
Result / Heritage
Result on Assets (Return on Assets)
Is the return received for every $ invested in assets.
Formula:
Net Income After Tax / Total Tangible Assets