accounting ratios

Question 1

gross profit margin

Answer 1

(gross profit/revenue)x100

Question 2

gross profit

Answer 2

revenue - cost of sales

Question 3

operating profit margin

Answer 3

(operating profit/revenue)x100

Question 4

operating profit

Answer 4

gross profit - other operating expenses

Question 5

profit for the year (net profit) margin

Answer 5

(profit for the year (net profit)/revenue)x100

Question 6

profit for the year (net profit)

Answer 6

operating profit - interests and costs

Question 7

current ratio

Answer 7

current assets/current liabilities

Question 8

acid test ratio (liquid capital ratio)

Answer 8

current assets - inventory/current liabilities

Question 9

net assets

Answer 9

current liabilities + non-current liabilities - current liabilities - non-current liabilities

Question 10

capital employed

Answer 10

non-current liabilities + total equity

Question 11

gearing ratio

Answer 11

(non-current liabilities/capital employed)x100

Question 12

return on capital employed (ROCE)

Answer 12

(operating profit/capital employed)x100

Question 13

revenue

Answer 13

selling price x number of units sold

Question 14

variable cost

Answer 14

cost per unit x number of units sold

Question 15

total costs

Answer 15

fixed costs + variable costs

Question 16

profit

Answer 16

total revenue - total costs
or
total contribution - fixed costs

Question 17

expected value of a decision with two possible outcomes

Answer 17

[payoff of A x probability of A] x [payoff of B x probability of B]

Question 18

net gain

Answer 18

expect value - initial cost of decision

Question 19

market growth

Answer 19

(change in market size over a period of time/original size of market)x100

Question 20

market share

Answer 20

(sales of one product or brand or business/total sales in the market)x100

Question 21

added value

Answer 21

sales revenue - costs of brought in goods and services

Question 22

labour productivity

Answer 22

number of output produced in a period of time/number of employees

Question 23

unit costs (average costs)

Answer 23

total costs/number of units of output

Question 24

capacity utilisation

Answer 24

(actual output/maximum possible output)x100

Question 25

return on investment

Answer 25

(profit from the investment/cost of the investment)x100

Question 26

variance

Answer 26

budgeted figure - actual figure

Question 27

contribution per unit

Answer 27

selling price - variable cost per unit

Question 28

total contribution per unit

Answer 28

contribution per unit x number of output sold or total revenue - total variable costs

Question 29

break-even output

Answer 29

fixed costs/contribution per unit

Question 30

margin of safety

Answer 30

actual level of output - break-even level of output

Question 31

labour turnover

Answer 31

(number of staff leaving/number of staff employed by the business)x100

Question 32

employee retention

Answer 32

(number of employees remained at a certain time period/number of employees employed by the business at the start of the time period)x100

Question 33

employee costs as percentage turnover

Answer 33

(employee costs/turnover)x100

Question 34

labour cost per unit

Answer 34

labour costs/number of unit of output

Question 35

payable days

Answer 35

(payables/cost of sales)x365

Question 36

receivable days

Answer 36

(receivables/revenue)x365

Question 37

average rate of return (ARR)

Answer 37

(average annual return/initial cost of project)x100

Question 38

price elasticity of demand (PED)

Answer 38

(% change in demand/% change in price)x100

Question 39

income elasticity of demand (YED)

Answer 39

(% change in demand/% change in income)x100

Question 40

net cash flow

Answer 40

total inflows - total outflows

Question 41

sales volume

Answer 41

total number of units sold/time

Question 42

absenteeism

Answer 42

(total staff absent on a day/total employed on a day)x100

Question 43

total equity

Answer 43

share capital + retained profit + any other reserves

Question 44

average sales per month

Answer 44

total sales/number of months

Question 45

simple payback

Answer 45

initial invested/annual payback

Question 46

average annual return

Answer 46

total profit of investment/number of years of investment

Question 47

net present value (NPV)

Answer 47

discount factor x cash flow

Question 48

net assets

Answer 48

non current assets + (working capital - non current liabilities)

Question 49

assets employed

Answer 49

non-current assets + working capital

Question 50

expected profit

Answer 50

profit x probability