Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business > ratio analysis > Flashcards

ratio analysis Flashcards

1
Q

what are the efficiency ratio’s?

A

asset turnover, inventory/stock turnover, creditors, debtors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what is the formula for asset turnover?

A

revenue / non-current assets X 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what does asset turnover tell a business?

A

shows how much money is generated for ever £1 of non-current assets.
showing how hard they are being worked.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what is stock turnover formula?

A

cost of sales / average stock held

cost of sales = opening stock + purchases - closing
average stock held = opening + closing / 2

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what does stock turnover tell the business?

A

tells them how many times a firm sells all its stock in one year - this will vary depending on the type of business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is the creditor formula?

A

payables / cost of sales X 365 (days)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what does creditor tell a business?

A

shows how many days on avergae it takes a firm to pay its creditors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what is the debtor ratio?

A

receivables / revenue X365

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what does the debtor ration tell a business?

A

how many days on average it takes a firm to collect its money.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what are the profitability ratio’s ?

A

gross profit margin, net profit margin, return on capital employed (ROCE) and return on equity (ROE).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is the formula for gross profit margin?

A

gross profit / turnover X 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

how do you calculate gross profit?

A

revenue - cost of sales.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what does the gross profit margin tell a business?

A

this can be improved by increasing prices or reducing costs. will depend on the type of business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is the net profit margin formula?

A

operating profit / revenue X 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what should net profit do ?

A

carry on increasing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what is the formula for return on capital employed?

A

operating profit / capital employed X 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what does ROCE show?

A

it is the best way for analysing profitability, should improve over time, as decent ROCE is 20-30%.

18
Q

what is the formula for ROE?

A

profit for that year / shareholders equity X 100

19
Q

what does ROE show a business?

A

measures how much profit is generated for £1 of a shareholders investment.

20
Q

what are the liquidity ratio’s?

A

current ratio and acid test ratio.

21
Q

what is the formula for the current ratio?

A

current assets / current liabilities

22
Q

what does the current ratio show you?

A

whether a firm can pay its bills when they are due.

23
Q

what is the acid ratio formula?

A

current assets - stock / current liabilities

24
Q

what does the acid ratio show u ?

A

the same as current asset ratio, but it considers the fact that stock takes time to convert into cash, therefore acid test ratio is a more realistic measurement.

25
Q

what are the risk / solvency ratio’s?

A

Gearing, debt to equity and interest cover

26
Q

what is the ratio formula for gearing?

A

non- current liabilities / capital employed

27
Q

what is capital employed?

A

total equity + non-current liabilities.

equity = retained profit and shareholders capital.

28
Q

what does gearing tell u?

A

it shows where a business gets its capital from, from looking at the proportion from loans rather than retained profit and shared capital. if a business has a gearing above 50% then they are high geared and vulnerable to changes in interest rates.

29
Q

what is debt to equity formula?

A

non-current liabilities / equity X 100

30
Q

what does dept to equity show?

A

long term liabilities in comparison to the share capital and retained profit

31
Q

what are the shareholders ratio’s?

A

dividend per share, dividend yield, earnings per share, price earning ratio.

32
Q

what is the formula for dividend per share ?

A

total dividends / no. of ordinary shares issued

33
Q

what does dividend per share tell us?

A

the value of the shares, shareholders who are wanting a quick return will want this number to be as high as possible.

34
Q

what is the dividend yeild ratio?

A

dividend per share / current market price X100

35
Q

what does the dividend yeilds want to be for shareholder?

A

shareholders want this to be as high as possible.

36
Q

what is the earning per share formula?

A

net profit for that year / number of shares issued

37
Q

what is the formula for price earnings ration?

A

market price share / earing per share

38
Q

what is depreciation?

A
  • fall in value of a non-current asset over time,
39
Q

straight line method for depreciation?

A

estimated useful life

40
Q

what is the residual value?

A
  • the residual value is the value of the asset at the end of its useful life ( estimate )

Business (101 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions