Finance - Ratio Analysis

Question 1

What are the three different ratios?

Answer 1

Profitability, Liquidity and Gearing

Question 2

What do profitabilty ratios measure?

Answer 2

the amount of profit made by a firm compared to the capital they have invested

Question 3

What do liquidity ratios measure?

Answer 3

a firms cash position at any given time

Question 4

What do gearing ratios measure?

Answer 4

a firms total capital that has been financed through long term borrowing (debt finance)

Question 5

What are the formulas I need to know for profitanbility ratios?

Answer 5

ROCE, Gross, Net and Operating Profit Margins

Question 6

How do you calculate ROCE formula?

Answer 6

Net Profit
———————— x100
Capital Employed

Question 7

How do you calculate GPM, OPM, NPM?

Answer 7

G/O/N Profit
——————- x100
Sales Revenue

Question 8

What are the two formulas I need to know for liquidity ratios?

Answer 8

Current Ratio and Acid Test Ratio

Question 9

How do I calculate Current Ratio?

Answer 9

Current Liabilities

Question 10

How do I calculate Acid Test Ratio

Answer 10

Current Liabilities

Question 11

What is the only formula for Gearing ratio?

Answer 11

Long term liabilities
—————————– x100
Capital Employed