Formulas - Ratios

Question 1

Gross profit margin

Answer 1

Gross profit
—————— x100
Sales

Question 2

Net profit margin

Answer 2

Net profit
—————— x100
Sales

Question 3

Operating profit margin

Answer 3

Operating profit
————— x100
Sales

Question 4

Selling expenses as a percentage of sales

Answer 4

Selling expenses
————- x100
Sales

Question 5

Expense as a percentage of sales

Answer 5

Expense
————x100
Sales

Question 6

Cost as a percentage of sales

Answer 6

Cost
——-x100
Sales

Question 7

Return on capital employed (ROCE)

Answer 7

Operating profit
——————x 100
Non current assets+ net current assets

Question 8

Return on capital employed (ROCE)

Answer 8

Operating profit
—————- x100
Capital + long term liabilities

Question 9

Return on net assets

Answer 9

Operating profit
—————- x100
Net assets

Question 10

Value added

Answer 10

Sales -( cost of materials used and bought in services)

Can be divided by number of employees

Question 11

Assets turnover

Answer 11

Turnover (sales revenue)
—————————-
Non cure assets +net current assets

Question 12

ROCE

Answer 12

Operating profit margin x asset turnover

Question 13

The current ratio

Answer 13

Current assets
———————
Current liabilities

Written as x:1
Where x is answer

Question 14

Quick ratio or acid test ratio

Answer 14

Current assets- inventory
———————
Current liabilities

Written as x:1

Question 15

Receivables collection period

Answer 15

Trade receivables
—————- x365
Credit sales

Question 16

Payables payment period

Answer 16

Trade payables
——————x365
Credit purchases

Question 17

Average inventory

Answer 17

0.5 x ( opening inventory + closing inventory)

Question 18

Average age of inventory

Answer 18

Average inventory
——————- x365
Cost of sales

Question 19

Average age of inventory

Answer 19

Closing inventory
—————x365
Cost of sales

Question 20

Inventory turnover

Times per year

Answer 20

Cost of sales
——————
Average inventory

Question 21

Inventory turnover

Times per year

Answer 21

Cost of sales
—————-
Closing inventory

Question 22

Working capital cycle

Answer 22

Inventory days+ receivable days - payables days

Question 23

Gearing ratio

Answer 23

Debt
————- x100
(Debt +equity)

Question 24

Debt to equity ratio

Answer 24

Debt
————— x100
(Ordinary share capital +reserves)

Question 25

Activity ratio ( production volume)

Answer 25

Standard hours for actual output
———————- x1000
Budgeted hours

Question 26

Capacity ratio

Answer 26

Actual hours worked
————————x100
Budget hours