Analysis of published accounts

Question 1

Return on capital employed

Answer 1

operating profit/ capital employed * 100

Question 2

Capital employed

Answer 2

the total value of all long-term finance invested in the business: it is equal to (non-current assets + current assets)−current liabilitiesornon-current liabilities + shareholders’ equity.

Question 3

Inventory turnover ratio

Answer 3

cost of goods sold /value of inventories

Question 4

Day’s sales in receivables ratio

Answer 4

trade accounts receivable×365 / revenue

Question 5

Accounts receivable turnover ratio

Answer 5

revenue / trade receivables

Question 6

Share price

Answer 6

the quoted price of one share on the stock exchange.

Question 7

Dividend

Answer 7

the share of the company profits paid to shareholders.

Question 8

Dividend yield ratio

Answer 8

dividend per share/ current share price * 100

Question 9

Dividend per share

Answer 9

total annual dividends / total number of issued shares

Question 10

Dividend cover ratio

Answer 10

profit for the year /annual dividends

Question 11

Price/earnings ratio

Answer 11

current share price /earnings per share

Question 12

Earnings per share

Answer 12

profit for the year /annual dividends (This is the amount of profit (after tax and interest) earned per share.)

Question 13

Gearing ratio

Answer 13

non-current liabilities / shareholders’ equity + non-current liabilities * 100