Financial Ratios Flashcards
What is the formula for Return on Ordinary Shareholders’ Funds (ROSF)?
(Net profit after tax & preference dividend (if any) / Ordinary share capital and reserves) x 100%
What does Return on Capital Employed (ROCE) measure?
(Operating profit (Net profit before interest and tax) / Capital employed) x 100%
How is Operating Profit Margin calculated?
(Operating profit / Sales revenue) x 100%
What is the formula for Gross Profit Margin?
(Gross profit / Sales revenue) x 100%
How do you calculate Inventory Turnover?
(Inventory / Cost of sales) x 365 days
What does the Trade Receivable Collection Period indicate?
(Trade receivables / Credit sales revenue) x 365 days
Use total revenue if cash/credit sales not split
How is the Trade Payables Payable Period calculated?
(Trade payables / credit purchases) x 365 days
Use cost of sales if ‘credit purchases’ not given
What is the formula for Sales Revenue to Capital Employed ratio?
Sales revenue / Capital employed (times)
What does the Current Ratio measure?
Current assets / Current liabilities (x:1)
How is the Acid Test Ratio calculated?
(Current assets – inventory) / Current liabilities (x:1)
What is Capital Gearing?
Non-current liabilities / Capital employed x 100%
Capital employed = equity + long term borrowings
How is the Debt/Equity ratio defined?
Non-current liabilities / Equity x 100%
What does Interest Cover indicate?
Profit before interest and tax / Interest (times)
How is Dividend Cover calculated?
Earnings for year available to ordinary shareholders/ Paid and/or announced ordinary dividends for year (times)
What is the formula for Earnings per Share?
Earnings for year available to ordinary shareholders / Number of ordinary shares in issue (typically in pence)
