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CIMA - F2 > 15. Analysing Financial Statements - Ratios > Flashcards

15. Analysing Financial Statements - Ratios Flashcards

1
Q

What are the 3 comparison options for financial ratios?

A

Another company, budget or prior period

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2
Q

Who are the 4 users of financial statements?

A
  1. Shareholders
  2. Suppliers/lenders
  3. Employees
  4. Management
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3
Q

What is the formula for gross profit margin?

A

Gross Profit / Revenue

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4
Q

What is the formula for operating profit margin?

A

Profit before interest and tax / revenue

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5
Q

What is the formula for net profit margin?

A

Profit after tax / revenue

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6
Q

What is the formula for net asset turnover?

A

Revenue / Total Assets Less Current Liabilities

or

Revenue / Shareholder funds + Non Current Liabilities

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7
Q

What is the formula for return on capital employed?

A

Profit before interest and tax / Total Assets Less Current Liabilities

OR

Operating profit margin x net asset turnover

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8
Q

What is the formula for return on equity?

A

Profit after tax / equity

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9
Q

What is the formula for working captial?

A

Current assets - current liabilities

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10
Q

What is the formula for the current ratio?

A

Current assets / current liabilities

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11
Q

What is the formula for the quick ratio?

A

Current assets - Inventory / current liabilities

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12
Q

What is the formula for receivables collection period?

A

Trade Receivables / Credit Sales x 365

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13
Q

What is the formula for payables collection period?

A

Trade Payables / Purchases (or COS) x 365

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14
Q

What is the formula for inventory days?

A

Inventory / COS x 365

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15
Q

What is the formula for inventory turnover?

A

COS / Inventory

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16
Q

What is the formula for the operating / cash cycle?

A

Inventory days + receivables days - payables days

17
Q

What does it mean to have high gearing vs low gearing?

A

High proportion of borrowing vs high proportion of equity

18
Q

What is the advantage of high gearing?

A

Debt is cheaper than equity (interest is fixed and tax deductible)

19
Q

What is the disadvantage of high gearing?

A

Harder to raise additional finance from lenders or new shareholders

20
Q

What is the formula for the gearing ratio?

A

Interest bearing debt (excl overdraft, incl pref shares) / TALCL

21
Q

What is the formula for the debt to equity ratio?

A

Interest bearing debt (excl overdraft, incl pref shares) / Shareholder Funds

22
Q

What is the formula for interest cover?

A

Profit Before Interest and Tax / Interest Payable Expense

CIMA - F2 (15 decks)

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