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Accounting > Chapter 16 - Basic Ratio Analysis > Flashcards

Chapter 16 - Basic Ratio Analysis Flashcards

1
Q

What are the 4 main types of ratios?

A
  • efficiency ratios
  • liquidity ratios
  • financing ratios
  • profitability ratios
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2
Q

What is the formula for asset turnover?

A

Sales/net assets

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3
Q

What is the formula for stock turnover?

A

Average stock/COS. X 365 days

Average stick = OS+CS/2

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4
Q

What is the formula for debtors collection period?

A

Trade debtors/sales X 365

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5
Q

What is the formula for creditors payment period?

A

Trade creditors/Purchases X 365 days

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6
Q

What is the current ratio?

A

CA/CL

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7
Q

What is the acid test or quick ratio?

A

CA-stock/CL

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8
Q

What is the capital gearing ratio?

A

Long term liabilities / long term liabilities + shareholders funds

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9
Q

What is the interest cover formula?

A

Operating profit/interest payable

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10
Q

What is the formula for EPS?

A

PAT/no of ordinary shares

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11
Q

What is the formula for gross profit margin?

A

GP/Sales X100%

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12
Q

What is the formula for operating profit margin?

A

Operating profit / sales X 100%

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13
Q

What is the formula for ROCE?

A

Operating profit / capital employed

Capital employed = LT Liabilities + shareholder funds

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14
Q

What is a provision and when should it enter BA?

A
  • liability of uncertain timing or amount

When
- entity is obligated
- it is probable
- reliable estimate can be made

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15
Q

What is a contingent liability?

A
  • liability doesn’t meet criteria of provision
  • should not be recognised in accounts instead should be included on disclosure note
  • if likelihood of paying out cash is remote it is not recognised and no disclosure is required
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16
Q

What is a contingent asset?

A
  • inflow is probable but not virtually certain
  • not recognised in the balance sheet but are disclosed in note
  • if inflow only possible or remote not recognised or disclosed
17
Q

What accountancy concept is responsible for the difference in treatment between contingent assets and liabilities?

A
  • prudence

Accounting (16 decks)

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