Profitability Flashcards
What are the profitability ratios
Return on shareholders funds, return on capital employed, gross profit percentage, operating profit percentage
What does the return on shareholders finds (ROSF) do
It compares profit for the period available to owners with their investment in the business for that period
How is the ROSF ratio expressed
As a percentage
How is the ROSF ratio calculated
As profit for the year / ordinary share capital +reserves x100
What is the return on capital employed ratio a fundamental measure of
Of business performance
What does the RoCE compare
It compares the operating profit (output) generated during a period with the long term capital invested in the business (input)
How is return on capital employed expressed
As a percentage
How is ROCE calculated
As operating profit / ordinary share capital + reserves + non current liabilities x 100
What does gross profit percentage relate
It relates gross profit to sales revenue for the period
What does GP% measure
It measures profitability in buying and selling goods or services before other expenses are taken into account
How is GP % expressed
As a percentage
How is it calculated
As Gross profit / sales revenue x100
What can causes increases in GP%
Sales prices have been increased or cost of purchasing stock has decreased
What can cause decrease in GP%
Sales prices have decreased or cost of purchasing stock has increased
What does operating profit percentage relate
It relates the operating profit for the period to the sales revenue
