Financial Ratios Flashcards
1
Q
What is return on capital employed
A
operating profit/ capital employed x100
2
Q
what is capital employed
A
equity+ non current liabilities
3
Q
what is equity
A
share capital + reserves
4
Q
what is current ratio
A
current assets/current liabilities
5
Q
what is payables days
A
trade payables / cost of sales x 365
6
Q
what is receivables days
A
trade receivables / sales revenue x 365
7
Q
what is inventory turnover
A
cost of sales / average inventory
8
Q
what are the 5 limitations of using financial ratios
A
1) figures are historical and can’t predict the future
2) some companies use window dressing to make figures look better
3) they don’t show qualitative factors like ethics and morale
4) dont show market share
5) can’t be compared to other businesses who use different accounting policys
