Chapter 7 Flashcards
What is the Return on capital employed formula (ROCE)?
=Profit from operations/( Total equity + Non current liabilities ) X 100
What is the gross profit margin formula?
=Gross Profit / Revenue X 100
What is the operating profit margin formula?
=Profit from operations/Revenue X 100
What is profit from operations?
Profit from operations is the profit before interest and tax
What is the asset turnover formula?
=Revenue/ (Total assets - Current liabilities)
What is the current ratio formula?
Current Ratio = Current assets / Current liabilities
What is the Quick ratio (Acid Test Ratio) formula ?
=(Current assets - Inventories) / Current Liabilities
What is the inventory Turnover formula?
=Cost of sales / Inventory
What is the working capital Cycle ?
Inventory days + Receivable Days - Payable Days
What is the gearing Formula?
Non-current liabilities/(Total Equity+Non-current liabilities)x100
What does the gearing ratio show?
It shows the extent to which a business is dependent on non-equity funds opposed to equity funding
What does a high gearing ratio mean ?
This means the business has a high proportion of borrowed funds
