Ratio Flashcards
Profit before interest and tax/ operating profit
Divide
Share capital + reserves + non-current liabilities
X 100
Return on Capital Employed (ROCE)
Gross profit
Divide
Sales revenue
X 100
Gross Profit Margin (GP%)
Operating profit
Divide
Sales revenue
X 100
Operating profit margin %
A company’s GP margin has declined in comparison with last year’s figure.
Why might this have happened?
Falls in sales price
Increase in cost of purchases
Could be strategic if sales price is reduced
Net profit
Divide
Sales revenue
X 100
Net profit margin %
Liquidity ratios
Current ratio
Acid test ratio
Current assets
Divide
Current liabilities
Current ratio
Current assets - inventory
Divide
Current liabilities
Acid test ratio
Efficiency ratios?
Asset turnover
Inventory days/ turnover
Receivable’s day’s
Payable days
Sales
Divide
Share capital + reserves + non-current liabilities
Asset turnover
Inventory
Divide
Cost of sales/ purchases
X 365
Inventory turnover
Trade receivables
Divide
Credit sales
X 365
Receivable’s days
Trade payables
Divide
Credit purchases
X 365
Payable days
Profit after tax less any preference dividends
Divide
Number of ordinary shares issued
X 100
Earnings per share
Market value per share
Divide
EPS (earnings per share)
Price/ earnings ratio (PE ratio)
