Ratio analysis Flashcards
1
Q
What is gearing ratio?
A
(non current liabilities/ capital employed) x100
2
Q
What is ROCE?
A
(operating profit/ capital employed)x100
3
Q
What is current ratio?
A
current assets/ current liabilities
4
Q
What does gearing ratio show?
A
Where the money in a business is coming from
5
Q
What does ROCE show?
A
Measures the profitability of a business and should be as high as possible.
6
Q
What are the limitations of ratio analysis?
A
- Balance sheet is a snapshot of one day. If in a dynamic market then figures could change.
- What a business owns and owes could fluctuate.
- Depends on external factors such as a recession.
7
Q
What is acid test ratio?
A
Current assets- stock/current liabilities.
