Ratios

Question 1

Gross profit margin (%) (profitability

Answer 1

Gross profit/sales revenue x 100

Question 2

Net profit margin (%) (profitability

Answer 2

Net profit/sales revenue x 100

Question 3

Return on equity (profitability)

Answer 3

Net profit/total equity x 100

Question 4

Return on capital employed (ROCE) (%) (profitability)

Answer 4

Operating profit (net) / total equity + NCL x 100

Question 5

Current ratio (liquidity)

Answer 5

Current assets / current liabilities

Question 6

Acid test ratio (liquidity)

Answer 6

CA - stock / CL

Question 7

Receivables days (efficiency)

Answer 7

Trade receivables / sales revenue x 365

Question 8

Payable days (efficiency)

Answer 8

Trade payables / cost of sales x 365

Question 9

Asset turnover (efficiency)

Answer 9

Sales revenue / net assets

Question 10

Stock turnover (efficiency)

Answer 10

• costs of sales / stock (for how many times turned over a year)
• stock / cost of sales x 365 (for days until stock is turned over)

Question 11

Gearing (%)

Answer 11

NCL / total equity + NCL x 100

Question 12

Interest cover (gearing)

Answer 12

Operating profit (net) / interest payable

Question 13

Dividend per share (shareholder)

Answer 13

Total dividends paid / number of shares in issue

Question 14

Dividend yield (shareholders)

Answer 14

Dividend per share / share price x 100

Question 15

Dividend cover (shareholder)

Answer 15

Profit after tax / dividends

Question 16

Earnings per share (shareholder)

Answer 16

Profit for the year / number of shares issued

Question 17

Price earnings (shareholder)

Answer 17

Market price of share / earnings per share