Ratios Flashcards
What do profitability ratios show
The level of profit against aspects of the business
What does the gross profit margin ratio show
The level of profit as a % of sales or turnover
What does the net profit margin ratio show
The net profit as a % of sales or turnover
What does ROCE show
The net profit as a % of capital employed
What does ROE show
How much profit is generated for every pound of shareholder funds invested
What do liquidity ratios show
The ability to convert assets into cash
What does the current ratio show
Whether the business can pay debts due in one year out of the current assets
What does the acid test ratio show
Same as current ratio but takes away stock as it may not all be sold
What do the efficiency ratios show
The ability of a business to manage assets and liabilities efficiently
What does asset turnover show
How efficiently a business uses it non-current assets to generate sales
What does stock turnover show
How quickly stock is sold
What does trade receivables (debtor days) show
How quickly money owed to businesses is paid
What does trade payables (creditor days) show
How quickly a business pays its suppliers
What does the gearing ratio show
The proportion of the business that’s financed through long-term borrowing
What does interest cover show
The number of times a business can pay its interest charges with the operating profit it makes
