3.6 Ratio Analysis Flashcards
0
Q
Net profit ratio
A
- (net profit / sales revenue) x 100
* shows the % of sales revenue that turns into net profit
1
Q
Gross profit ratio
A
- (Gross profit / sales revenue) x 100
* Needs to be compared to the same industry, with previous or predicted years
2
Q
Current ratio
A
- current assets / current liabilities
- short-term liquidity ratio that calculates if the firm is able to meet its debts within the next 12 months
- Above 1.6 - good
- To improve - sell fixed assets for cash / leash back if the business still needs it, increase loans for more cash
3
Q
Liquid ratio
A
- (current assets - stock) / current liabilities
- Measures if a firm can meetits short-term debts
- Ignores stock when calculating
