Financial Indicators For Paper 1

Question 1

% gross profit on sales

Answer 1

(GP÷TO) × 100

Question 2

% gross profit on cost of sales

Answer 2

(GP ÷ CP) ×100

Question 3

% net profit on sales

Answer 3

(NP ÷ TO) ×100

Question 4

% operating expenses on sales

Answer 4

(OE ÷ TO) ×100

Question 5

% operating profit on sales

Answer 5

(OP ÷ TO) ×100

Question 6

Current ratio

(liquidity)

Answer 6

Current assets : Current liabilities

Question 7

Acid test ratio

(Liquidity)

Answer 7

(Current assets - inventory) : Current liabilities

Or

(Trade and other receivables + cash) : Current liabilities

Question 8

Stock turnover rate / stock on hand

Answer 8

Cost of sales ÷ average trading stock

Question 9

Stock holding period

Answer 9

(Average trading stock ÷ cost of sales) ×12
Or
(Average trading stock ÷ cost of sales) ×365

Question 10

Average debtors’ collection period

Answer 10

(Average debtors ÷ credit sales) ×365

Question 11

Average creditors’ payment period

Answer 11

(Average creditors ÷ credit purchases) ×365

Question 12

Average trading stock

Answer 12

Cost of sales ÷ 2

Question 13

Solvency ratio

Answer 13

Total assets : total liabilities

Question 14

Debt : equity ratio
(Gearing)

Answer 14

Non-current assets : owner’s equity

Question 15

Return on partners’ equity

Answer 15

(NP ÷ average owner’s equity) ×100