Measuring Profitability & Liquidity

Question 1

Gross Profit Margin equation

Answer 1

Gross Profit / revenue x100

Question 2

What does the Current Ratio measure?

Answer 2

The ability of a company to pay its short-term obligations

Question 3

What is the formula for calculating Operating Profit Margin?

Answer 3

Operating Profit Margin = Operating Profit / Revenue

Question 4

What does the Quick Ratio measure?

Answer 4

The company’s ability to cover its short-term obligations with its most liquid assets

Question 5

What is the formula for calculating Net Profit Margin?

Answer 5

Net Profit Margin = Net Profit / Revenue

Question 6

What is the formula for calculating Debt-to-Asset ratio?

Answer 6

Debt-to-Asset ratio = Total Debt / Total Assets

Question 7

Mark up equation

Answer 7

GP / COGS X10P

Question 8

Return on capital employed

Answer 8

P /CE x 100

Question 9

Profit of the year equation

Answer 9

R-COGS-E

Question 10

Capital employed

Answer 10

TA - CL

Question 11

ROCE equation :

Answer 11

Profit / Capital Employed x100

Question 12

Current ratio =

Answer 12

Current assets / current liabilities

Question 13

Liquid capital ratio

Answer 13

Current A - Inventory / current liability