ratio meanings

Question 1

gross profit margin meaning (20%)

Answer 1

for every £1 of revenue, 20p becomes gross profit

Question 2

mark up meaning (20%)

Answer 2

for every £1 of cos, there is 20p of gross profit

Question 3

PiRtR meaning (5%)

Answer 3

for every £1 of revenue, 5p becomes profit

Question 4

RoCE meaning (15%)

Answer 4

for every £1 of capital employed, there is 15p of profit

Question 5

current ratio meaning (2:1)

Answer 5

for every £1 of current liabilities there is £2 of current assets

Question 6

liquid capital ratio meaning (0.5:1)

Answer 6

for every £1 of current liabilities, there is 50p of liquid assets

Question 7

capital gearing meaning (50%)

Answer 7

for every £1 of capital employed there is 50p of ncl

Question 8

EiRtR meaning (50%)

Answer 8

ever £1 of revenue, 50p is spent on expenses

Question 9

inventory turnover meaning (3 times)

Answer 9

they have sold their av inv 3 times during the year

Question 10

inventory turnover meaning (20 days)

Answer 10

the business holds inventory for an average of 20 days

Question 11

trade rec days meaning (30 days)

Answer 11

on average credit customers take 30 days to pay

Question 12

trade pay days meaning (30 days)

Answer 12

on average it takes the business 30 days to pay for its credit purchases

Question 13

dividend yield meaning

Answer 13

shows shareholders the percentage return on the value of their investment

Question 14

earnings per share meaning

Answer 14

shows shareholders how much profit has been generated by each share, measure of profitability

Question 15

price earnings meaning

Answer 15

higher number indicates a high market price. due to expected future profits OR low earnings per share due to low profits

Question 16

dividend cover meaning

Answer 16

measures how easily the company can afford the dividends without using retained earnings

Question 17

interest cover meaning

Answer 17

measure how easily the company can afford the interest