Chapter 7 Flashcards

1
Q

What is the Return on capital employed formula (ROCE)?

A

=Profit from operations/( Total equity + Non current liabilities ) X 100

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2
Q

What is the gross profit margin formula?

A

=Gross Profit / Revenue X 100

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3
Q

What is the operating profit margin formula?

A

=Profit from operations/Revenue X 100

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4
Q

What is profit from operations?

A

Profit from operations is the profit before interest and tax

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5
Q

What is the asset turnover formula?

A

=Revenue/ (Total assets - Current liabilities)

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6
Q

What is the current ratio formula?

A

Current Ratio = Current assets / Current liabilities

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7
Q

What is the Quick ratio (Acid Test Ratio) formula ?

A

=(Current assets - Inventories) / Current Liabilities

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8
Q

What is the inventory Turnover formula?

A

=Cost of sales / Inventory

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9
Q

What is the working capital Cycle ?

A

Inventory days + Receivable Days - Payable Days

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10
Q

What is the gearing Formula?

A

Non-current liabilities/(Total Equity+Non-current liabilities)x100

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11
Q

What does the gearing ratio show?

A

It shows the extent to which a business is dependent on non-equity funds opposed to equity funding

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12
Q

What does a high gearing ratio mean ?

A

This means the business has a high proportion of borrowed funds

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