Final exam- profitibility ratios

Question 1

ROCE definition

Answer 1

how much profit is being earned from the finance invested in the business by the finance providers - equity and debt.

Question 2

ROCE equation

Answer 2

profit before interest & tax(PBIT)/capital employed (total assets - current liabilities) x100

Question 3

profit margin definition

Answer 3

profit earned per £ of revenue

Question 4

profit margin equation

Answer 4

PBIT/revenue x100

Question 5

ROE definition

Answer 5

return available to the ordinary shareholders after all other expenses/outgoings have been deducted

Question 6

ROE equation

Answer 6

profit after tax - preference dividend/equity invested in company x100

Question 7

asset turnover definition

Answer 7

revenue earned per £ invested

Question 8

asset turnover equation

Answer 8

revenue/capital employed (total assets - current liabilities)

Question 9

return on equity definition

Answer 9

return available to the ordinary shareholder after all other expenses/outgoings have been deducted.

Question 10

return on equity equation

Answer 10

profit after tax - preference dividend/equity invested in the company