Performance Indicators Flashcards
How do you calculate the Gross Profit Margin?
Gross Profit/Revenue X 100
How do you calculate the Operating Profit Margin?
Operating Profit/Revenue X 100
How do you calculate the Distribution Cost as a percentage of Revenue
Distribution Costs/Revenue X 100
How do you calculate the Administration Expenses as a percentage of Revenue?
Administration Expenses/Revenue X 100
How do you calculate Working Capital?
Current Assets - Current Liabilities
How do you calculate Capital Employed?
Non-Current Assets + Working Capital or Total Equity + Non Current Liabilities
How do you calculate Return on Capital Employed?
Operating Profit/Capital Employed X 100
What does Gearing show?
The Gearing equation shows how the business is structured - whether it is funded by secure capital or large loans. It shows how much of the business is funded by loans. Ideally the lower the better.
How do you calculate Gearing?
Non-Current Liabilities/(Total Equity + Non-Current Liabilities) X 100
What does Return on Shareholders’ Funds show?
It shows how their investment is performing in terms of profitability
How do you calculate Return on Shareholders Funds
Profit After Tax/Total Equity X 100
How do you calculate the Current Ratio?
Current Assets/Current Liabilities
What does the Current Ratio show?
It compares the current liabilities to current assets.
How do you calculate Inventory Holding Period (Days)?
Inventories/Cost of Sales X 365
What does the Inventory Holding Period (Days) show?
This tells us how often inventory is expected to turnover.
How do you calculate the Acid Test Ratio?
(Current Assets - Inventory)/Current Liabilties
What does the Acid Test Ratio show?
It shows us the current assets compared to current liabilities without inventory as it is not easily turned into cash or at least not at full value
How do you calculate Inventory Turnover?
Cost of Sales/Inventories
What does the Inventory Turnover measure?
It measures how many times in a year the inventory is replaced
How do you calculate Trade Receivables Collection Period (Days)?
Trade Receivables/Revenue X 365
How do you calculate Trade Payables Payment Period (Days)?
Trade Payables/Cost of Sales X 365
How do you calculate The Working Capital Cycle?
Inventory Holding Period + Trade Receivables Collection Period - Trade Payables Payment Period
What does Trade Payables Payment Period show?
How long it takes for the business to pay their suppliers
What does Trade Receivables Collection Period Show?
How long it takes to receive the money due from trade receivables
How do you calculate Interest Cover?
Operating Profit/Finance Costs
What does Interest Cover show?
This shows the amount of times the business can pay back short term and interest based on the operating profit and recognise the impact of debt on the profit of the organisation.
How do you calculate Asset Turnover (Net Assets)?
Revenue/(Total Assets - Current Liabilities)
How do you calculate Asset Turnover (Non-Current Assets)
Revenue/Non-Current Assets
What does Asset Turnover (Net Assets) show?
This measures the efficiency of a company’s assets in generating revenue. As the conceptual framework suggests that an asset is something that will generate economic benefits
What does Asset Turnover (Non-Current Assets) show?
It measures and shows the relation between the revenue generated per unit of non-current assets.
