4. Interpreting published accounts Flashcards
Liquidity
A businesses ability to meet short-term cash payments on time.
Current ratio
A measure of the ability of a business to meet short term debts from current assets
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 revenue.
Return on capital employed
A measure of how efficiently a business is using its capital to generate profits.
Asset turnover
A measure of how effectively a business is using its assets to generate sales
Capital employed
The total capital invested in the business from long term sales
Total equity + Non-current liabilities.
Inventory/Stock turnover
A measure of how many times per year a business turns over its stock from sales
Payables (creditors) 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 it’s debt 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 shareholders
Dividend yield
A measure of the return received on an investment, expressed as a percentage of the current market price of the share.
