financial ratios Flashcards
Gross profit margin
(Gross profit ÷ revenue) x 100
Gross profit mark up
(Gross profit ÷ cost of sales) x 100
Expenses in relation to revenue
(Expenses ÷ revenue) x 100
Profit in relation to revenue
(Profit for yr before tax ÷ revenue) x 100
Return on capital employed
Profit from operations ÷ capital employed
Capital employed: capital/funds + non current liabilities
Current ratio/ net current asset ratio
(Current assets ÷ current liabilities)
Expressed as x:1
Acceptable figure: 2:1
Liquid capital ratio/ acid test ratio
(Current assets - closing inventory) ÷ current liabilities
Expressed as x:1
Acceptable figure: 1:1
Rate of inventory turnover (2 formulas)
(Average inventory ÷ cost of sales) x 365
Cost of sales ÷ average inventory (in times)
Average inventory: (opening stock + closing stock) ÷ 2
Trade receivables days
(Trade receivables ÷ credit sales) x 365
Trade payable days
(Trade payables ÷ credit purchases) x 365
Gearing
(Non-current liabilities ÷ capital employed) x 100
What are the 5 profitability ratios
- gross profit margin
- gross profit mark-up
- profit in relation to revenue
- expenses in relation to revenue
- ROCE
What are the 2 liquidity ratios
- current ratio/ net current asset ratio
- acid test ratio/ liquid capital ratio
What are the 3 efficiency ratios
- rate of inventory turnover
- trade receivables days
- trade payable days
What is the capital structure ratio
The gearing ratio
