interpetations of account formulas

Question 1

return on capital employed

Answer 1

operatingprofit(Net profit)
/ capital employed
x100%

Question 2

return on equity

Answer 2

profit after tax - preference divedend x100%

/OSC + reserves

Question 3

mark up

Answer 3

gross profit
/cost of sales
x100%

Question 4

gross margin

Answer 4

gross profit/
sales
x100%

Question 5

net margin

Answer 5

net profit/
sales
100%
(as high aspossible)

Question 6

total exps/sales%

Answer 6

total expenses/
sales
x100%
(as low as possible)

Question 7

all profitability formulas

Answer 7

ROCE
return on equity
mark up
gross margin
net profit
total exp/sale%

Question 8

what happens wih all profatibilty formulas

Answer 8

all percentages%

Question 9

all liquidity formulas

Answer 9

current ratio

acid test

Question 10

what happens to all liquidity formulas

Answer 10

all ratios

Question 11

current ratio

Answer 11

current assets /

current liabilitys

Question 12

all activity formulas

Answer 12

stock turnover
debtors days
creditors days

Question 13

how to find average stock

Answer 13

closing stock + opening stock /2

Question 14

what is operating profit

Answer 14

net profit before tax and interest

Question 15

how to find closing stock

Answer 15

average stock x2 -opening stock

Question 16

stock turnover

Answer 16

cost of sales /

average stock

Question 17

debtors days

Answer 17

debtors x 12 (months)
/credit sales
(as low as possible)

Question 18

creditors days

Answer 18

creditors x 12 (months)
/credit purchases
(higher than credit allowed)

Question 19

all gearing formulas

Answer 19

capital gearing (theres 2)
interest cover

Question 20

capial gearing 1

Answer 20

loans +pref share capital
/capital employed
x100%
50% in neutral gearing

Question 21

capital gearing 2

Answer 21

loans +pref share capital
/OSC = reserves
1:1 is neutral

Question 22

interet cover

Answer 22

operating profit
/interest
say 3 or 4 times

Question 23

interest /Dividend policy formulas

Answer 23

earnings per share
profit earning ratio
divedend cover 
divedend yield
period to recoup price as payout rate

Question 24

earning per share

Answer 24

(net) profit after tax -pref div
/ number of ordinary shares
in cent
(greater than last year)

Question 25

pe ratio

Answer 25

market price /
earnings per share
as high as posibble
compare with others

Question 26

dividend per share

Answer 26

ordinary divedends/
number of ordinary shares
x 100/1
(higher than last year)

Question 27

dividend cover

Answer 27

profit after tax - pref div
/ordinary divedend
or EPS/DPS
(at least 2 times)

Question 28

divedend yield

Answer 28

divedend per sharex100%
/market price
( greater than risk free investements)

Question 29

period to recoup price as payout rate

Answer 29

market price /
divedend per share
( relativly low , compare to last year)