ratios

Question 1

mark up

Answer 1

gross profit divided by cost of sales x100

Question 2

gross margin

Answer 2

gross profit divided by sales x 100

Question 3

net margin

Answer 3

net profit divided by sales x 100

Question 4

return on capital employed

Answer 4

operating profit divided by capital employed x 100

Question 5

return on equity funds

Answer 5

net profit - preference dividends divided by no of ordinary shares + profit and loss balancex100

Question 6

current ratio

Answer 6

current assets divided by current liabilities

Question 7

acid test

Answer 7

current assets - closing stock divided by current liabilities

Question 8

stock turn over ratio

Answer 8

cost of sales divided by average stock

Question 9

average stock

Answer 9

opening stock + closing stock divided by 2

Question 10

operating profit

Answer 10

net profit + interest

Question 11

debtors days

Answer 11

debtors divided by credit sales x12

Question 12

creditors days

Answer 12

creditors divided by credit purchases x12

Question 13

gearing ratio

Answer 13

loans + preference share capital divided by capital employed x100

Question 14

interest cover

Answer 14

operating profit divided by interest

Question 15

earnings per share

Answer 15

net profit - preference dividends divided by number of ordinary shares

Question 16

price earnings ratio

Answer 16

market price divided by earnings per share

Question 17

dividend per share

Answer 17

ordinary dividends divided by number of ordinary shares

Question 18

dividend cover

Answer 18

earnings per share divided by dividend per share

Question 19

dividend yield

Answer 19

dividend per share divided by market price x100

Question 20

period to recoup price at payout rate

Answer 20

market price divided by dividend per share

Question 21

% of profits paid out as dividends

Answer 21

dividend per share divided by earnings per share x100

Question 22

real rate of return

Answer 22

dividend cover x dividend yield