Financial Ratios Flashcards
What is the equation for gross profit margin
Gross profit/revenue x100
What is the equation for operating profit margin
Operating profit/revenue x100
What is the equation for profit for the year margin
Profit for the year/revenue x100
What is the equation for current ratio
Current assets / current liabilities
What is the equation for gearing
Non current liabilities / total equity + non current liabilities x100
What is the equation for payable days
Payables / cost of sales x365
What is the equation for receivables days
Receivables / revenue x365
What is the equation for inventory turnover
Cost of sales / average inventories held
What is cash flow
The movements of cash into and out of a business over a period of time
What is cash flow forecast
State the inflows and outflows of cash that the managers of a business expect over some future period
What is profit
The surplus of total revenue over total costs for a business over a trading period
What is capital structure
The way in which a business has raised the capital it requires to purchase its assets
What is contribution
The difference between revenue and variable costs
What is profitability
A measure of financial performance that compares a business’s profits to some other factors such as revenue
What is profit quality
The extent to which a particular type of profit is sustainable
What is profit margin
A ratio that expresses a business’s profit as a percentage of its revenue over some trading period
What is ratio analysis
A technique for analysing a business’s financial performance by comparing one piece of accounting information with another
What are assets
Items owned by the business
What are liabilities
Money owed by a business
What is an overdraft
When a business is allowed to spend more than it holds in its current account up to an agreed limit
What is venture capital
Funds advanced to businesses in the form of share and loan capital
What is share capital
Finance invested into a company as a result of the sale of shares in the business
What are debentures
Loans with fixed interest rates that are long term
What is working capital
Current assets minus current liabilities
What is depreciation
The reduction of the value of an asset over a period of time
