Analysis Of Financial Performance And Position

Question 1

Profitability Ratios
What is the gross profit margin?
What is operating profit margin?
What is return on capital employed?
What is return on equity/return on?
What’s included in equity?

Answer 1

Profit/Revenue x 100
Profit before income tax/Revenue x 100
Profit before income tax/capital employed x 100
Profit after tax/equity x100
Share capital and reserves

Question 2

Liquidity
What is the current ratio?
What is the quick ratio(acid test)?

Answer 2

Assets/liabilities x 100
Current assets excl inventory/liabilities x 100

Question 3

Efficiency ratio
Receivable days?
Inventory days?
Payables days?
Working capital days?

Answer 3

Trade payables/total purchases or cos x 365
Inventory/cos x 365
Receivables days/total sales x 365

Receivables
+inventory
-payables

Question 4

Asset Efficiency Ratios
What is asset turnover?
What is non current asset turnover?

Answer 4

Revenue/capital employed x 100
Revenue/ non current assets x 100

Question 5

Gearing
What is gearing? Explanation and formula

Answer 5

Long term debt measured as a percentage of equity or capital employed

Gearing = Debt/Equity
Gearing = Debt/Equity+Debt

Question 6

What is interest cover?

Answer 6

Profit before interest/interest payable

Question 7

Dividend cover
Dividend yield

Answer 7

Earnings per share/dividend per share
Dividends per share/market price per share

Question 8

Liquidity Ratio
Current ratio
Quick ratio(acid test)

Answer 8

Current assets/current liabilities
Current assets - inventory/current liabilities

Question 9

EBIDTA

Answer 9

Profit before tax and interest + depreciation + amortisation

Question 10

Gross profit
Operating profit
Capital Turnover

Answer 10

Revenue-cos/revenue
PBT+I/CoS
Sales revenue/CE