Ratio Analysis

Question 1

Gross Profit Margin

Answer 1

Ratio looks at gross profit as a % of sales turnover

Question 2

Mark-Up

Answer 2

Ratio calculates gross profit as % of the cost of sales

Question 3

Net Profit Margin

Answer 3

Ratio shows the net profit as a % of sales

Question 4

ROCE

Answer 4

Ratio shows the % return a business is achieving from the capital invested to generate the return

Question 5

Current Ratio

Answer 5

Ratio shows a business the amount of current assets it owns in relation the amount of current liabilities it owes

Question 6

Liquid Capital Ratio

Answer 6

Ratio gives a more accurate reflection of the true liquidity of a business as it removes the least liquid of all current assets from the equation i.e. inventories

Question 7

Trade Receivable Days

Answer 7

Ratio measures, on average, how long it takes for debtors to pay and is expressed as a number of days

Question 8

Trade Payable Days

Answer 8

Ratio shows, on average, how long it takes for debtors to pay and is expressed as a number of days

Question 9

Inventory Turnover

Answer 9

Ratio shows the average amount of time an item is held by a business and is expressed as a number of days