All Relevant Ratios Calculations

Question 1

How to calculate capital employed?

Answer 1

Shareholder’s equity + long-term debt (NCL) OR Total assets - current liabilities

Question 2

How to calculate asset turnover?

Answer 2

Revenue / Capital employed

Question 3

How to calculate return on capital employed?

Answer 3

(PBIT / capital employed) * 100%

Question 4

What represents net debt? (Interest bearing)

Answer 4

Debentures
Bank loans
Finance/lease liabilities

Question 5

Current ratio calculation? (X:1)

Answer 5

Current assets / current liabilities

Question 6

Quick ratio calculation? (X:1)

Answer 6

(Current assets - inventory) / Current liabilities

Question 7

Inventory holding period calculation?

Answer 7

(Inventory/Cost of sales) * 365 days

Question 8

How to calculate receivable days (receivables collection period)?

Answer 8

(Receivables/Credit sales) * 365 days

Question 9

How to calculate payable days (payables payment period)

Answer 9

(Payables/Credit purchase) * 365 days

Question 10

How to calculate gearing ratio (related to solvency)?

Answer 10

(Debt / (Debt + Equtiy)) * 100

(Interest bearing debt / (Interest bearing debt + equity)) * 100

Question 11

How to calculate interest cover?

Answer 11

PBIT / Interest payable

Question 12

How to calculate dividend per share?

Answer 12

Total dividends/Number of shares in issue

Question 13

How to calculate dividend cover?

Answer 13

PFY/Dividends

Question 14

How to calculate dividend yield?

Answer 14

(Dividends/Share price) * 100%

Question 15

How to calculate PE ratio?

Answer 15

Price per share / Earnings per share

Question 16

How to calculate gross profit margin?

Answer 16

Gross profit / Revenue

Question 17

How to calculate operating profit margin?

Answer 17

Operating profit / Revenue

Question 18

Calculate net profit margin from ROCE?

Answer 18

ROCE / asset turnover

As ROCE = net profit margin * asset turnover

Question 19

How to calculate EPS?

Answer 19

PFY / weighted average number of shares (e.g. number of ordinary shares)

Question 20

if PFY and asset turnover are present?

Answer 20

PFY = Net profit margin * asset turnover

Question 21

Calculate net assets turnover?

Answer 21

Revenue / (Equity + debt)

Question 22

Ways to calculate capital employed?

Answer 22

Debt + equity

Total assets - current liabilities

Question 23

Loss/profit on disposal (consolidation)?

Answer 23

Proceeds - net assets - carrying amount of goodwill + NCI

Question 24

Loss/profit on disposal (single entity)?

Answer 24

Proceeds - cost of investment

Question 25

Positive change in ROCE?

Answer 25

An increase

Question 26

Positive change in asset turnover?

Answer 26

An increase

Question 27

Positive change in capital employed?

Answer 27

A decrease

Question 28

Positive change in profitability ratios?

Answer 28

An increase

Question 29

Positive change in liquidity ratios?

Answer 29

An increase

Question 30

Positive change in inventory holding period?

Answer 30

A decrease

Question 31

Positive change in receivables collection period?

Answer 31

A decrease

Question 32

Positive change in payables payment period?

Answer 32

An increase

Question 33

Positive change in gearing?

Answer 33

A decrease

Question 34

How to find the market price?

Answer 34

It is given in the question

Question 35

PE ratio increase?

Answer 35

Advantage: Stronger earnings
Disadvantage: Positive change should be speculative