Finance Ratios

Question 1

Current ratio

Answer 1

Current assets ÷ current liabilities

Question 2

Acid test

Answer 2

(Current assets - stock) ÷ current liabilities

Question 3

Gearing ratio

Answer 3

(Non-current liabilities ÷ capital employed) x 100

Question 4

Debt to equity ratio

Answer 4

(Debt ÷ equity) x 100

Question 5

Interest cover

Answer 5

Net profit ÷ interest payable

Question 6

Non-current asset turnover

Answer 6

Revenue ÷ non-current assets

Question 7

Stock turnover (times)

Answer 7

Cost of stock (or sales) ÷ average stock

Question 8

Stock turnover (days)

Answer 8

(Stock ÷ cost of sales) x 365

Question 9

Debtor days

Answer 9

(Trade receivables ÷ revenue) x 365

Question 10

Creditor days

Answer 10

(Trade payables ÷ cost of sales) x 365

Question 11

Gross profit margin

Answer 11

(Gross profit ÷ sales) x 100

Question 12

Net profit margin

Answer 12

(Net profit ÷ sales) x 100

Question 13

Return on capital employed (ROCE)

Answer 13

(Net profit ÷ capital employed) x 100

Question 14

Return on equity

Answer 14

Profit for the year ÷ shareholders’ equity

Question 15

Dividend per share

Answer 15

Total dividends paid ÷ number of shares issued

Question 16

Dividend yield

Answer 16

(Dividend per share ÷ market price of share) x 100

Question 17

Earnings per share

Answer 17

Profit for the year ÷ number of shares issued

Question 18

Price earnings ratio

Answer 18

Market price of share ÷ earnings per share