chapter 26 Flashcards
1
Q
what is profitability ratio
A
ability of business to generate profit
2
Q
how is profitability calculated
A
1.return on capital employed
2.gross profit margin
3.net profit margin
3
Q
what is level of long term debt ratio
A
how much long term liabilities does the business have
4
Q
what is liquidity
A
ability of business to pay short term debts
5
Q
how is level of long term debt ratio calculated
A
gearing ratio
6
Q
how is liquidity ratio calculated
A
1.current ratio
2.acid test ratio
7
Q
equation for return on capital employed
A
net profit/capital employed x100
8
Q
equation for gross profit margin
A
gross profit/revenue x100
9
Q
equation for net profit margin
A
net profit/revenue x100
10
Q
equation for current ratio
A
current assets/current liabilities
