Accounting ratios Lecture 3

Question 1

Types of ratios

Answer 1

Profitability
Efficiency or activity
Liquidity
Financial gearing
Investment

Question 2

Profitability ratio

Answer 2

Profit in relation to another key figure

Question 3

Efficiency or activity ratio

Answer 3

Use of resources against a key figure

Question 4

Liquidity ratio

Answer 4

Indication for the sufficiency of liquid resources

Question 5

Financial gearing ratio

Answer 5

Relation between financing by owners (equity) and other sources

Question 6

Investment ratio

Answer 6

Indicators for returns and performance of shares

Question 7

Which profitability ratios are there?

Answer 7

Return on Ordinary Shareholders’ Funds (ROSF)
Profit (less preferred divided)/ Share Capital and Reserves

Return on (Average) Capital Employed (ROCE or ROACE)
Operating profit / Share capital + Reserves + Non-current liabilities

Operating Profit Margin

Gross Profit Margin

Question 8

Return on Ordinary Shareholders’ Funds (ROSF)

Answer 8

Profit (less preferred divided)/ Share Capital and Reserves

Question 9

Return on (Average) Capital Employed (ROCE or ROACE)

Answer 9

Operating profit / Share capital + Reserves + Non-current liabilities

Question 10

Operating Profit Margin

Answer 10

Operating profit / Sales revenue

Question 11

Gross Profit Margin

Answer 11

Gross profit / Sales revenue