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AAT Level 4 - Management Accounting: Budgeting > 9. Financial Performance Indicators > Flashcards

9. Financial Performance Indicators Flashcards

1
Q

What are the profitability ratios?

A

Margin on sales - gross profit margin and net profit margin

Return on capital employed (ROCE)

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2
Q

How do you calculate gross profit margin?

A

(Gross profit / sales) X100

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3
Q

How do you calculate net profit margin?

A

(Net profit (PBIT) / sales) X100

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4
Q

What May cause a falling GPM or NPM?

A

Increasing costs or reducing selling prices

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5
Q

What does the difference between GPM and NPM allow you to establish?

A

Whether there are changes in COS or operating costs

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6
Q

How do you calculate ROCE?

A

(Net profit (PBIT) / capital employed (TALCL)) X100

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7
Q

What does PBIT stand for?

A

Profit before interest and tax

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8
Q

What does ROCE measure?

A

How much profit is generated for every £ of assets employed, it indicates how efficiently the company uses its assets to generate profit.

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9
Q

What are the revenue ratios?

A

Average selling price
Sales per employee
Asset turnover

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10
Q

How do you calculate the average selling price?

A

Total revenue / number of units sold

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11
Q

What does the average selling price show?

A

The average selling price of units, it can be compared to competitors to see how competitively priced out products are

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12
Q

How do you calculate the sales per employee?

A

Sales / number of employees

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13
Q

What happens if the sales per employee falls?

A

Staff may not be working hard enough

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14
Q

How do you calculate asset turnover?

A

Sales / capital employed (TALCL)

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15
Q

What does asset turnover measure?

A

The efficiency of the use of assets

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16
Q

What are the cost ratios?

A 
Cost of sales as a % of turnover
Cost as a % of sales
Average production cost per unit 
Average material cost per unit 
Average labour rate per hour
17
Q

How do you calculate the cost of sales as a % of turnover?

A

(Cost of sales / sales) X100

18
Q

What does a change in percentage indicate for cost of sales as a % of turnover?

A 
Increasing = poor cost control
Decreasing = ‘economies of scale’ as volume rises
19
Q

How do oh calculate cost as a % of sales?

A

(Cost / sales) X100

20
Q

How do you calculate average production cost per unit?

A

Total production costs / number of units produced

21
Q

How do you calculate average material cost per unit?

A

Total purchase costs / number of units purchased

22
Q

How do you calculate average labour rate per hour?

A

Total labour costs / number of hours paid

23
Q

What are the liquidity ratios?

A 
Current ratio
Quick ratio
Average receivables collection period
Average payables period
Average inventory holding period
24
Q

How do you calculate current ratio?

A

Current assets / current liabilities

25
Q

What does the current ratio measure?

A

Whether the short term liquid assets are adequate to cover short term liabilities

26
Q

How do you calculate the quick ratio?

A

( current assets - inventory) / current liabilities

27
Q

How do you calculate the average receivables collection period?

A

(Trade receivables / sales) X 365

28
Q

How do you calculate the average payable period?

A

(Trade payables / purchases of COS ) X 365

29
Q

How do you calculate the average inventory holding period?

A

(Closing inventory / COS) X 365

30
Q

What are the labour productivity ratios?

A

Labour efficiency ratio (smarter)
Labour capacity ratio (longer)
Labour production volume ratio (more units)

31
Q

How do you calculate the labour efficient ratio?

A

(Expected hours to make actual output / actual hours to make actual output) X100

32
Q

How do you calculate the labour capacity ratios?

A

(Actual hours to make actual output / planned (budgeted) hours) X100

33
Q

How do you calculate the labour production volume ratio?

A

(Expected hours to make actual output / planned (budgeted) hours) X100

AAT Level 4 - Management Accounting: Budgeting (10 decks)

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