Ratios

Question 1

Return on Capital Employed %

Answer 1

(Earnings before Interest and tax (EBIT) ÷ Capital Employed) x 100

Capital employed= Noncurrent Liabilities + Equity or Total Assets – Current Liabilities

Question 2

Profit Sales %

Answer 2

((Net profit before tax + Loan Interest) ÷ Sales) x 100

Ignore interest on bank overdraft

Question 3

Assets Turnover

Answer 3

Sales ÷ Capital Employed

Capital employed= Noncurrent Liabilities + Equity or Total Assets – Current Liabilities

Question 4

Current Ratio

Answer 4

Current Assets ÷ Current Liabilities

Question 5

Quick Test Ratio

Answer 5

(Current Assets- Inventories) ÷ Current Liabilities

Question 6

Gross Profit Margin %

Answer 6

((Sales – Cost of Sales) ÷ Sales) x 100

Question 7

Accounts Receivable Collection Period (days)

Answer 7

(Accounts Receivable ÷ Sales) × 365

Or credit sales if available

Question 8

Accounts Payable Payment Period (days)

Answer 8

(Accounts Payables ÷ Cost of Sales) × 365

Or credit purchases if available

Question 9

Inventory Turnover (times)

Answer 9

Cost of Sales ÷ Closing Inventory

Or average inventory

Question 10

Gearing %

Answer 10

(Noncurrent Liabilities ÷ (Equity + Noncurrent Liabilities)) x 100