Ratios Flashcards
What are the 4 profitability ratios?
Gross profit margin
Net profit margin
Return on captain employed
Return on equity
Gross profit margin calculation ?
Gross profit/revenue x100
What does the GPM show?
How much of every pound turnt over is gross profit
NPM calculation?
Net profit/revenue x100
NPM what is it?
For every pound of turnover what % is net profit
ROCE calculation?
Operating profit/long term capital employed x100
ROCE meaning?
% of money made from the money put into the business.
How good a business is at generating profits from capital
ROE calculation?
Net profit/equity x100
What does roe show?
the measure of a company’s net income divided by its shareholders’ equity
What are the 4 liquidity ratios?
Current
Acid test
Gearing
Debt equity
Current ratio calculation?
Current assets/current liabilities
What do the liquidity ratios show?
How easily a business can get cash/turn assets to cash
AT ratio calculation ?
Current assets- stock=current liabilities
Gearing ratio calculation?
Debt/equity+debt
What does it mean if a business is highly geared ?
They have a lot of loans
Debt equity calculation?
Debt/equity x100
What are the 5 efficiency ratios
Non current asset turnover
Stock turnover
Debtor days/collection period
Creditor days/payment
Interest cover
What do the activity/efficiency ratios show?
Measures a companies short term/current performance
Non current asset turnover?
Turnover/fixed assets
Stock turnover?
Cost of sales/stock
Debtor days?
Debtors/turnoverx365
Creditor days?
Creditors/cost of sales x365
Interest cover ?
Operating profit/interest
What is operating profit ?
Profit before tax interest and depreciation
