ratios

Question 1

gross profit margin formula

Answer 1

gross profit/revenue x100

Question 2

mark-up formula

Answer 2

gross profit/cos x100

Question 3

profit in relation to revenue formula

Answer 3

profit before tax/revenue x100

Question 4

return on capital employed formula (sole trader and limited company)

Answer 4

sole trader= profit before interest/capital employed x100
limited company= profit from operations/capital employed x100

capital employed= total equity+non current liabilities
equity= share capital+reserves+retained earnings

Question 5

current ratio formula

Answer 5

current assets/current liabilities

Question 6

liquid capital ratio formula

Answer 6

current assets- inventory/current liabilities

Question 7

capital gearing formula

Answer 7

non current liabilities/capital employed x100

Question 8

expenses in relation to revenue formula

Answer 8

expenses/revenue x100

Question 9

inventory turnover formula (times and days)

Answer 9

times= cos/av inv
days= av inv/cos x365

Question 10

trade receivable days formula

Answer 10

trade receivables/credit sales x365

Question 11

trade payables days formula

Answer 11

trade payables/credit purchases x365

Question 12

dividend per share formula

Answer 12

dividends paid/number of issued shares

Question 13

dividend yield formula

Answer 13

dividend per share/ market price per share x100

Question 14

earnings per share formula

Answer 14

profit after tax in pence/ number of shared issues

Question 15

price earnings formula

Answer 15

current market price/ earnings per share

Question 16

dividend cover formula

Answer 16

profit after interest and tax/ ordinary share dividends paid

Question 17

interest cover formula

Answer 17

profit before interest and tax/ interest payable