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AC102 > Ratios > Flashcards

Ratios Flashcards

1
Q

Return on Capital Employed

A

(Operating profit)/(Share Capital + Reserves + Non-Current Liabilities)

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2
Q

Return on Equity

A

(Profit for the year - Dividends)/(Share Capital + Reserves)

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3
Q

Operating Profit Margin

A

Operating Profit / Sales Revenue

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4
Q

Gross Profit Margin

A

Gross Profit / Sales Revenue

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5
Q

Mark-Up

A

Gross Profit / COS

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6
Q

Inventory Days

A

(Average Inventories Held / Cost of Sales) x 365

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7
Q

Receivables Days

A

Average Trade Recievables / Credit sales

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8
Q

Payables days

A

(Average trade payables / Credit purchases) x 365

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9
Q

Net Asset turnover ratio

A

Sales Revenue / Share Capital + reserves + Non-current liabilities

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10
Q

Operating cash cycle

A

Average inventories holding period + Average settlement period for Recievables - Average payment period for payables

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11
Q

Liquidity

A

Short-term ability to generate cash for working capital needs and immediate debt repayments

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12
Q

Solvency

A

Long-term ability to generate cash internally or externally to satisfy capacity needs, fuel growth and repay debts

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13
Q

Current ratio

A

Current assets / current liabilities

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14
Q

Acid test ratio

A

(Current assets - Inventory)/Current liabilities

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15
Q

Cash ratio

A

Operating cash flows / current liabilities

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16
Q

Sources of long-term finance in a limited company

A

Share issue + Retained Earnings + Long term loans

17
Q

debt financing

A
  • Payment of an interest and repayment of a loan is a legal obligation
  • Interest is tax deductible, dividends are not
  • Loans have a priority in repayment
  • there is no dilution of control when debt is issued
  • loans are less risky form of investment
18
Q

Equity financing

A
  • Managers have greater control over equity than debt financing - dividends can be forgone
  • shareholders are last in line during the bankruptcy process
  • ordinary shares are more risky form of investment
19
Q

Gearing ratio

A

Non-current liabilities / (Share capital + reserves + non-current liabilities)

20
Q

Interest cover ratio

A

Operating profit / Interest payable

21
Q

Dividend payout ratio

A

Dividend announced for the year / profit (after tax) less any preference dividend

22
Q

Dividend yield

A

Dividend per share / market value per share

23
Q

EPS

A

Profit (After taxation) less preference dividend / Number of ordinary share in issue

24
Q

P/E ratio

A

Market Value per share / Earnings per share

AC102 (4 decks)

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