(F3/4/5/6) Measuring Profitability/Liquidity/Efficiency and Ratios Flashcards
Gross Profit Margin Formula
gross profit/revenue x 100
What is a mark-up?
The difference between the selling price of a good or service and cost and the higher the mark up, the greater the gross profit
Mark-Up Formula
gross profit/cost of sales x 100
(net)Profit Margin Formula
(net) profit/revenue x 100
What is return on capital employed (ROCE)?
A measure of how effectively a business has used the capital they have invested
Return on Capital Employed Formula
operating profit/(total equity + non-current liabilities) x 100
Current Ratio Formula
current assets/current liabilities
What is liquidity?
A measure of the ability of a business to survive in the long term
What is liquid capital ratio?
A ratio that removes inventory because it is difficult to turn into cash to pay a debt
Liquid Capital Ratio Formula
(current assets - inventory) / current liabilities
What are efficiency ratios?
A measure of a how efficient a business manages its finance and uses it inventory
What is trade receivable days?
^ in detail?
Trade Receivable Days Formula
(trade receivable/credit sales) x 365
What is trade payable days?