3.5.2 Rario Analysis Flashcards

1
Q

What does ROCE stand for?

A

Return on Capital Employed

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2
Q

What is the equation for ROCE?

A

(Operating Profit) / (Total equity + Non-current Liabilities) * 100

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3
Q

What is ROCE?

A

A meausure of how effieicently a business is using its capital employed to generate profits

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4
Q

What is Gearing?

A

Measure what proportions of a business’ capital is funded through long term loans

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5
Q

What is the equation for Gearing?

A

(Non current Liabilities / Total equity + Non Current liabilities) * 100

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6
Q

What are some reasons for gearing?

A

Risk of rising intrest rates
Set investment criteria
Strategic decisions

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7
Q

What are some reasons for return of captial employed?

A

Financial Rewards
Efficiency trainging
Future investments
Caoacity utilisation targets

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8
Q

What is a benfit of assessing performance?

A

Structure for comparison can be made

Aids decision making

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