Analytical Ratios Flashcards
What is the formula for return on capital employed?
(Profit before interest and tax) / (Equity + net debt)
Effective use of resources
What is the formula for gross profit margin?
(Gross profit x 100) / (Revenue)
Assess profitability before taking overheads into account
What is the formula for cost of sales percentage?
(Cost of sales x 100) / (Revenue)
Assess the relationship of costs to revenue
What is the formula for operating cost percentage?
(Operating costs x 100) / (Revenue)
Assess the relationship of costs to revenue
What is the formula for net (operating) margin?
(Profit before interest and tax x 100) / (Revenue)
Assess profitability after taking overheads into account
What is the formula for current ratio?
Current assets: Current liabilities
Assess ability to pay current liabilities from reasonably liquid assets
What is the formula for quick ratio?
Receivables + Current investments + Cash: Current liabilities
Assess ability to pay current liabilities from reasonably liquid assets
What is the formula for gearing ratio?
(Net debt x 100) / (Equity)
Assess reliance on external finance
What is the formula for interest cover?
(Profit before interest payable) / (Interest payable)
Assess ability to pay interest charges
What is the formula for net asset turnover?
(Revenue) / (Capital employed)
Assess revenue generated from asset base
What is the formula for inventory turnover?
(Cost of sales) / (Inventories)
Assess the level of inventory held
What is the formula for inventory days?
(Average Inventory x 365) / (Cost of sales)
Assess the average inventory-holding period
What is the formula for trade receivables collection period?
(Trade receivables x 365) / (Revenue)
Assess the ability to turn receivables into cash
What is the formula for trade payables collection period?
(Trade payables x 365) / (Purchases)
Assess the ability to pay suppliers
