(F3/4/5/6) Measuring Profitability/Liquidity/Efficiency and Ratios Flashcards

1
Q

Gross Profit Margin Formula

A

gross profit/revenue x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a mark-up?

A

The difference between the selling price of a good or service and cost and the higher the mark up, the greater the gross profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Mark-Up Formula

A

gross profit/cost of sales x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

(net)Profit Margin Formula

A

(net) profit/revenue x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is return on capital employed (ROCE)?

A

A measure of how effectively a business has used the capital they have invested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Return on Capital Employed Formula

A

operating profit/(total equity + non-current liabilities) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Current Ratio Formula

A

current assets/current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is liquidity?

A

A measure of the ability of a business to survive in the long term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is liquid capital ratio?

A

A ratio that removes inventory because it is difficult to turn into cash to pay a debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Liquid Capital Ratio Formula

A

(current assets - inventory) / current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are efficiency ratios?

A

A measure of a how efficient a business manages its finance and uses it inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is trade receivable days?

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

^ in detail?

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Trade Receivable Days Formula

A

(trade receivable/credit sales) x 365

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is trade payable days?

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

^ in detail

A
17
Q

Trade Payable Days Formula

A

(trade payable/credit purchase) x 365

18
Q

What is inventory turnover?

A
19
Q

^ in detail

A
20
Q

Inventory Turnover Formula

A

(average inventory/cost of sales) x 365

21
Q

What are the limits of ratio?

A
  • Ratio are average and don’t show the worst or best of the business
  • Ratios highlight but don’t fix problems
  • Ratio that comes from a statement only reflect the value at the time it was taken
  • Poor performance doesn’t always means the business is failing
  • Difficult to compare with other business