BAR formula sheet & cheat sheet
Every ratio, variance, and threshold in one place. Review the night before, skim the morning of.
1. Liquidity Ratios (Topic B1)
Current Ratio = Current Assets / Current Liabilities
Quick (Acid-Test) Ratio = (Cash + Marketable Securities + Net AR) / Current Liabilities
Cash Ratio = (Cash + Marketable Securities) / Current Liabilities
Working Capital = Current Assets − Current Liabilities (a dollar amount, not a ratio)
Key rule: The quick ratio EXCLUDES inventory and prepaid expenses because they are slow to convert to cash.
2. Activity Ratios & Cash Conversion Cycle (Topic B1)
Receivables Turnover = Net Credit Sales / Average Net AR; DSO = 365 / AR Turnover
Inventory Turnover = COGS / Average Inventory; Days in Inventory = 365 / Inventory Turnover
Payables Turnover = COGS / Average AP; DPO = 365 / Payables Turnover
Operating Cycle = Days in Inventory + DSO
Cash Conversion Cycle = Days in Inventory + DSO − Days Payable
Trap: Inventory and payables turnover use COGS, but receivables turnover uses SALES. Days payable is SUBTRACTED in the cash conversion cycle.
3. Solvency, Profitability & DuPont ROE (Topic B1)
Debt-to-Equity = Total Liabilities / Total Equity
Debt Ratio = Total Liabilities / Total Assets
Times Interest Earned = EBIT / Interest Expense
Margins: Gross Margin = Gross Profit / Sales; Operating Margin = Operating Income / Sales; Net Margin = Net Income / Sales
ROA = Net Income / Average Total Assets; ROE = Net Income / Average Total Equity
DuPont ROE = Net Margin × Asset Turnover × Equity Multiplier = (NI/Sales) × (Sales/Assets) × (Assets/Equity)
Key rule: Use AVERAGE balances for turnover and return ratios when both years are given. DuPont’s first two terms (margin × turnover) equal ROA before leverage.
| Ratio | Numerator | Denominator |
|---|---|---|
| Quick ratio | Cash + marketable securities + net AR | Current liabilities |
| Inventory turnover | Cost of goods sold | Average inventory |
| Receivables turnover | Net credit sales | Average net receivables |
| Times interest earned | EBIT (before interest and taxes) | Interest expense |
| ROA | Net income | Average total assets |
| ROE | Net income | Average total equity |
4. Cost Behavior, CVP & Breakeven (Topic B2)
High-Low Variable Rate = (Cost at High − Cost at Low) / (Units at High − Units at Low); Fixed = Total Cost − (Variable Rate × Units)
Contribution Margin = Selling Price − Variable Cost per Unit; CM Ratio = CM / Price
Breakeven Units = Fixed Costs / CM per Unit; Breakeven $ = Fixed Costs / CM Ratio
Target-Profit Units = (Fixed Costs + Target Profit) / CM per Unit
Margin of Safety = Sales − Breakeven Sales; MOS % = (Sales − Breakeven Sales) / Sales
Degree of Operating Leverage = Contribution Margin / Operating Income
Absorption − Variable Income = Fixed OH per Unit × (Units Produced − Units Sold)
Key rule: Use the contribution margin (not the variable cost) as the breakeven denominator. In a decision, ignore sunk costs and unavoidable allocated fixed overhead.
5. Direct Materials & Labor Variances (Topic B4)
Materials Price Variance (MPV) = (Actual Price − Standard Price) × Actual Quantity Purchased
Materials Quantity Variance (MQV) = (Actual Quantity Used − Standard Quantity Allowed) × Standard Price
Labor Rate Variance (LRV) = (Actual Rate − Standard Rate) × Actual Hours
Labor Efficiency Variance (LEV) = (Actual Hours − Standard Hours Allowed) × Standard Rate
Standard Quantity Allowed = Standard Input per Unit × Actual Units Produced
Trap: The materials price variance is based on quantity PURCHASED; the quantity variance on quantity USED. Standard quantity allowed uses ACTUAL output, never budgeted output.
6. Overhead & Sales Variances (Topic B4)
VOH Spending = Actual VOH − (Standard Rate × Actual Hours)
VOH Efficiency = (Actual Hours − Standard Hours Allowed) × Standard Rate
FOH Budget (Spending) Variance = Actual Fixed OH − Budgeted Fixed OH
FOH Volume Variance = Budgeted Fixed OH − Applied Fixed OH (Standard Rate × Standard Hours Allowed)
Sales Price Variance = (Actual Price − Budgeted Price) × Actual Units Sold
Sales Volume Variance = (Actual Units − Budgeted Units) × Budgeted CM per Unit
Key rule: Price/rate variances multiply by the ACTUAL quantity; quantity/efficiency variances multiply by the STANDARD price or rate. The fixed-OH volume variance has no spending component, it reflects capacity utilization only.
| Variance | Formula | Driver |
|---|---|---|
| Materials price | (AP − SP) × AQ purchased | Cost paid per input unit |
| Materials quantity | (AQ used − SQ allowed) × SP | Input quantity used |
| Labor rate | (AR − SR) × AH | Wage rate paid |
| Labor efficiency | (AH − SH allowed) × SR | Hours used |
| FOH budget (spending) | Actual FOH − Budgeted FOH | Fixed-cost spending |
| FOH volume | Budgeted FOH − Applied FOH | Capacity utilization |
7. Capital Budgeting (Topic B5)
Present Value = FV / (1 + r)^n; PV of Annuity = Annual Cash Flow × PV annuity factor
NPV = Sum of [Cash Flow_t / (1 + r)^t] − Initial Investment (accept if NPV > 0)
IRR = the rate where NPV = 0 (accept if IRR > hurdle rate)
Profitability Index = PV of Future Cash Inflows / Initial Investment (accept if > 1.0)
Payback (even flows) = Initial Investment / Annual Cash Flow
Key rule: Payback ignores the time value of money and any cash flows after the payback point. NPV is preferred for ranking mutually exclusive projects.
8. WACC & CAPM (Topic B5)
WACC = (E/V) × Re + (D/V) × Rd × (1 − t), where V = D + E
Cost of Equity (CAPM) = Rf + β × (Rm − Rf) (the bracket is the market risk premium)
After-Tax Cost of Debt = Rd × (1 − t)
DCF Value = Sum of [FCF_t / (1 + WACC)^t] + Terminal Value / (1 + WACC)^n
Trap: The (1 − tax) shield applies to DEBT only, never to equity. Discount project cash flows at WACC, not at the cost of equity.
9. Revenue Recognition, Advanced ASC 606 (Topic B6)
Five-Step Model: (1) identify the contract, (2) identify performance obligations, (3) determine the transaction price, (4) allocate to obligations, (5) recognize as/when satisfied
Allocation by SSP: Allocated Price = Transaction Price × (Obligation SSP / Total SSP)
Cost-to-Cost: % Complete = Costs Incurred to Date / Total Estimated Costs; Revenue = % Complete × Contract Price
Contract Asset = revenue recognized > billings; Contract Liability = billings > revenue recognized
Constraint: Include variable consideration only to the extent a significant reversal is probable NOT to occur. An assurance-type warranty is accrued as a cost (ASC 460), not a separate obligation; a service-type warranty IS a separate obligation.
10. Leases: Lessee Measurement (Topic B7)
Lease Liability = PV of remaining lease payments at the discount rate (implicit rate if known, otherwise incremental borrowing rate)
Right-of-Use Asset = Lease Liability + Prepaid Payments + Initial Direct Costs − Lease Incentives
Finance lease criteria (any ONE = finance): ownership transfers, purchase option reasonably certain, lease term is a major part of economic life, PV of payments is substantially all of fair value, or the asset is so specialized it has no alternative use.
Practical bright lines: major part of economic life ≈ 75% or more; substantially all of fair value ≈ 90% or more (policy benchmarks, not codified requirements)
Trap: Initial direct costs increase the ROU asset but are NOT part of the lease liability. A finance lease is front-loaded; an operating lease is a single straight-line expense.
11. Consolidations, EPS & Segments (Topics B8, B10)
Goodwill = Consideration Transferred + FV of NCI + FV of Previously Held Interest − FV of Identifiable Net Assets Acquired
Unrealized Profit in Inventory = Intercompany Gross Profit % × Intercompany Inventory Remaining in Ending Inventory
Basic EPS = (Net Income − Preferred Dividends) / Weighted-Average Common Shares Outstanding
Treasury Stock Method: Incremental Shares = Options Outstanding − (Options × Exercise Price / Average Market Price)
If-Converted (bonds): numerator + Interest × (1 − Tax Rate); denominator + shares from conversion
Segment 10% tests: reportable if revenue, |profit or loss|, or assets ≥ 10% of the respective combined segment total; then reportable segments must cover ≥ 75% of consolidated external revenue
Antidilution rule: Include a potential common share only if it reduces EPS. In a net loss period, all potential common shares are antidilutive, so diluted EPS equals basic EPS.
12. Governmental Accounting (Topics B11, B12)
Fund Categories:
Governmental (GRaSPP): General, Special Revenue, Capital Projects, Debt Service, Permanent
Proprietary (SE): Internal Service, Enterprise
Fiduciary (CIPPOE): Custodial, Investment Trust, Pension/OPEB Trust, Private-Purpose Trust
Governmental (GRaSPP): General, Special Revenue, Capital Projects, Debt Service, Permanent
Proprietary (SE): Internal Service, Enterprise
Fiduciary (CIPPOE): Custodial, Investment Trust, Pension/OPEB Trust, Private-Purpose Trust
Modified Accrual (governmental funds): revenue when MEASURABLE and AVAILABLE (within 60 days for property taxes); expenditures when the liability is incurred. No depreciation, no long-term debt in the fund.
Opening Budgetary Entry: Dr Estimated Revenues / Cr Appropriations / plug Budgetary Fund Balance
GASB 54 Fund Balance (most to least constrained): Nonspendable → Restricted → Committed → Assigned → Unassigned (unassigned is positive only in the General Fund)
Fund Balance → Net Position: add capital assets net of depreciation, subtract long-term liabilities (bonds, net pension liability), add revenue deferred only because it was unavailable
Net (Expense)/Revenue = Expenses − Program Revenues; then + General Revenues = Change in Net Position
Major fund test: a fund is major only if the element is ≥ 10% of its CATEGORY total AND ≥ 5% of the governmental + enterprise combined total (the General Fund is always major). Government-wide statements EXCLUDE fiduciary activities.
Keep studying
This formula sheet pairs best with active practice. Jump into the full study guide or cross-reference the other section cheat sheets below.