Liquidity - Current Ratio Flashcards
What does liquidity show?
Assess whether a business has sufficient cash or equivalent current assets to be able to pay its debts as they fall due
How do you calculate current ratios?
Current Assets / current liabilities
What is Gearing?
Measures the proportion of a business capital (finance) provided by debt
How do you calculate gearing?
Non-current liabilities / total equity + non-current liabilities
What are Payables?
Amounts owed by a business to suppliers and others.
What are receivables?
Amounts owed to a business by customers
What are payable days?
The average length of time taken by a business to pay amounts owed
What are receivable days?
The average length of time taken by a business to pay amounts owed
How do you calculate receivable days?
Trade receivables / revenue (sales) x 365
How do you calculate payable days?
Trade payables / costs of sale x 365
What is inventory Turnover?
How often each year a business sells and replaces its inventory
How do you calculate inventory turnover?
Costs of sales / Inventories
How do you calculate Return on capital employed?
Operating profit (Net profit) / Total Equity + Non-current liabilities x100
How do you calculate capital structure?
Debt / Equity ratio
What s capital structure?
The capital of a business represents the finance provided to it to enable it to operate over the long-term
