3.5 Profitability and Liquidity ratio analysis Flashcards
1
Q
Equation for Gross Profit Margin
A
(Gross profit / Sales revenue) * 100%
2
Q
Equation for Net Profit Margin
A
(Net profit before Interest and Tax / Sales revenue) * 100%
3
Q
Equation for Current Ratio
A
Current assets / Current liabilities
4
Q
Equation for Quick Ratio
A
(Current assets less stock) / Current liabilities
5
Q
Equation for Return on Capital Employed (ROCE)
A
(Net profit before Interest and Tax) / Capital employed
6
Q
Formula for capital employed
A
Loan capital (long-term liabilities) + share capital + accumulated retained profit
7
Q
Define liquidity
A
The ability of the business to have sufficient cash or working capital to pay off its short-term debts
