Analysis and evaluation of financial information Flashcards
what are the ratios needed for accounting?
Gross profit margin%
mark up%
rate of inventory turnover (times and days)
profit in relation to revenue%
Expenses in relation to revenue%
ROCE%
current ratio :1
liquid capital ratio :1
trade receivable days
trade payable days
capital gearing%
What does ROCE stand for?
return on capital employed
what is the liquid capital ratio also know as?
Acid test
how do you work out gross profit margin?
(Gross profit/ revenue)x100
shows percent of sales that are gross profit
how do you calculate Rate of inventory turn over? (both methods)
times= COS/ average inventory
days= (average inventory/ COS)x365
number of times inventory is restocked or number of days
how do you calculate average inventory?
(opening inventory+ closing inventory)/2
How do you calculate mark up?
(gross profit/COS)x100
percentage added to cost of sales in terms of gross profit
What is the formula for expenses in relation to revenue?
(expenses/revenue)x100
expenses as a percentage of sales
How do you calculate ROCE?
(operating profit/ capital employed)x 100
shows return as a % of capital into the business
what is capital employed?
total amount of capital used for the acquisition of profits by a firm or project
what is operating profit?
profit before tax or interest has been removed
how do you calculate the current ratio?
current assets/ current liabilities
shows current assets over current liabilities
amount of CA to pay CL
what is liquid capital ratio formula?
(CA- inventory)/current liabilities
same as the current ratio but only the most liquid |CA
how do you calculate trade receivable days?
(trade receivables/credit sales)x365
average time a credit customers take to pay a business
how do you calculate trade payable days?
(trade payables/credit purchases)x365
average time a business takes to pay suppliers
