> Question 8 Formulas Accounting equation: Assets Liabilities and Owner's Equity Current ratio: current assets/current liabilities Acid test ratio: (current assets - inventory)/current liabilities Return on equity: net income/total shareholder's equity Return on assets: net income/total assets Assets to equity: total assets/shareholder's equity Profit margin: net income/net sales (or sales if net sales not available) Gross margin: gross profit/sales Operating profit or EBIT (Earnings Before Interest and Taxes): net income plus interest and tax Sources of Cash (Year Over Year) Assets- (decrease) Liabilities + (increase) Owner's Equity + (increase) . Uses of Cash (Year Over Year) Assets + (increase) Liabilities - (decrease) Owner's Equity - (decrease) 2 pts