4: Interpreting published accounts Flashcards
Liquidity
A business’s ability to meet short-term cash payments on time.
Current ratio
A measure of the ability of a business to meet short term debts.
Acid test ratio
A measure of the ability of a business to meet short term debts from liquid assets.
Profitability
The relationship between business’s profits and sales revenues.
Return On Capital Employed (ROCE)
A measure of how efficiently a business is using its capital t generate profits.
Asset turnover
A measure of how effectively a business is using its assets to generate sales.
Capital employed
Capital Employed = total equity + non-current liabilities. It is the total capital invested in the business from long-term sales.
Inventory (stock) turnover
A measure of how many times per year a business turns over its stock through sales.
Payables (creditor) days
A measure of the average number of days taken to pay suppliers
Receivables (debtor) days
A measure of the average number of days taken by a business to collect its debts from customers.
Gearing ratio
The percentage of capital employed that comes from non-current liabilities.
Shareholder ratios
Ratios that help measure the value of the return received by shareholders.
Dividends per share
The number of pence per share received by the shareholders.
Dividend yield
A measure of the return received on an investment, expressed as a percentage of the current market price of the share.
