Ratios Flashcards
What is ROCE and how is it calculated
It is a profitably measure which measures the return/profits as a % or m4s
Returns on investment / as a % of the capital invested into the organisation
What is gearing ratio
% of investment that is funded through financial borrowing
how is gearing calculated
borrowed money / money invested x 100
Gearing scores
if ratio is between 0-25% the business is lowly geared
From 25% to 50% the business is moderately geared
Anything above 50% is classified as a highly geared business and therefore vulnerable to raises in interest rates as the majority of capital is borrowed
What is the current ratio
It is a liquidity ratio which measures how well a business can pay of short term debt (liabilities)
How do you calculate current ratio
assets/liabilities
