Module 8 Flashcards
How to calculate gross margin?
Gross profit/turnover x 100
How to calculate mark up?
Gross profit/cost of sales x 100
How to calculate net profit margin?
Profit before interest and tax PBIT/ turnover x 100
How to calculate return on capital employed?
Primary ratio
Profit before interest and tax PBIT/ capital employed x 100
How to calculate capital employed?
Total assets - current liabilities
OR
shareholders funds+ long term creditors
How to calculate asset turnover?
Turnover / capital employed
How to calculate earnings per share?
Profit or loss attributable to ordinary shares/ weighted average no. Ordinary shares
After tax and after preference dividends
How to calculate current ratio?
Current assets/current liabilities
Look to be greater than 1
What are the four types of radios?
Profitability
Liquidity
Management/Activity
Risk
How to calculate debtor days?
Trade debtors/credit sales x 365
How to calculate creditor days?
Trade creditors/credit purchases x 364
How to calculate stock turnover?
Costs of sales /stock
How to calculate stock days?
Stock / cost of sales x 365
How to calculate gearing ratio?
Debt capital / shareholders funds x 100
OR
debt capital / capital employed x 100
Debt/equity OR
Debt/(debt + equity)
How to calculate interest cover?
PBIT/ interest charges
How to find out purchases?
Cost of sales - opening stock + closing stock
How to calculate working capital cycle?
Debtor days + stock days - creditor days
What are the limitations of ratio analysis?
Historic information used - inflation effects? Inaccurate what’s happening
Year end figure manipulation to look better
Lack of information
Dangers of inter firm comparisons
- accounting policies
- different industries
