Ratio analysis

Question 1

Gross Profit margin

Answer 1

Gross Profit / sales revenue x 100%

Question 2

Operating profit margin

Answer 2

Operating profit / Sales revenue x 100%

Question 3

Return on capital employed (ROCE)

Answer 3

Operating profit / Capital employed x 100%

Question 4

return on equity (ROE)

Answer 4

profit after tax / equity x 100%

Question 5

current ratio

Answer 5

current assets / current liabilities :1

Question 6

Acid Test ratio

Answer 6

current assets - Inventories / current liabilities :1

Question 7

Gearing ratio

Answer 7

Non current liabilities / capital employed x 100%

Question 8

Interest cover

Answer 8

Operatingprofit / interest payable

Question 9

Earnings per share (EPS)

Answer 9

Profit after tax / number of shares issued

Question 10

price earnings ratio

Answer 10

share price / EPS

Question 11

Dividend per share (DPS)

Answer 11

total ordinary shares paid / number of shares issued

Question 12

dividend yield

Answer 12

DPS / Market price per share x 100%

Question 13

Inventory turnover period

Answer 13

closing inventories / cost of sales x 365

Question 14

receivables collection period

Answer 14

trade receivables / sales revenue x 365

Question 15

payables payment period

Answer 15

trade payables / purchases x 365
( Do not use cost of sales as an approx for purchases)