ratios Flashcards
retained earnings
opening balance of retained earnings
+profit
-dividends
assets equations with drawings
assets=liabilities+capital+profit-drawings
^ =liabilities + (capital-loss-drawings)
current ratio
current assets/ current liabilities
liquidity shows how well short term debt is covered
acid test ratio
(current assets-inventories)/current liabilities
liquidity good financial health
inventory days
(inventories/cost of sales) x365
how long it takes the business to generate sales=inventory size
efficiency ratio
receivable days
(trade receivable/sales) x365
how long it takes business to generate trade receivables=sales
efficiency ratio
payable days
(trade payable/cost of sales) x365
how long it takes to get payables=cos
efficiency ratio
long term debt to capital ratio
long term debt/ total assets
leverage ratio
proportion of debt used to finance assets
interest cover
operating profit/interest expense
how easily they can pay back outstanding debt
gross profit margin
gross prof/sales
profit ratio how much prof earn for each unit of sales rev
operating profit margin
operating prof/sales
profit ratio how much prof earn for each unit of sales rev
net profit margin
profit for year/sales
profit ratio how much prof earn for each unit of sales rev
assets turnover
sales/assets
efficiency in using assets to generate turnover
return on assets
net profit/sales x sales/assets
profitability
how much profit can be generated from assets
return on equity
net profit/sales x sales/assets x assets/equity
profit generated from equity
