Ratios

Question 1

Correct calculation for capital employed to be used in ROCE?

Answer 1

Shareholder’s funds + long-term liabilities

Total assets - current liabilities

Question 2

Gross profit margin?

Answer 2

Gross profit/Sales * 100

Question 3

Operating margin?

Answer 3

PBIT/Sales * 100

Question 4

ROCE?

Answer 4

PBIT/Capital employed * 100
OR

Operating Profit margin * asset turnover

Sales/capital asset turnover ratio

Question 5

ROE?

Answer 5

(Profit after tax - preference dividends)/Ordinary shareholder funds * 100

Question 6

Asset turnover?

Answer 6

Sales/Capital employed

Question 7

Current ratio?

Answer 7

Current assets/Current liabilities

Question 8

Quick ratio?

Answer 8

(Current assets - Inventory)/Current liabilities

Question 9

Receivables collection period?

Answer 9

Average AR/Annual credit sales * 365 days

Question 10

Payables payment period?

Answer 10

Average AP/Annual credit purchases * 365 days

Question 11

Inventory holding period?

Answer 11

Average inventory/Annual COS * 365 days

Question 12

Operating cycle?

Answer 12

Inventory + Receivables - Payables

Question 13

Sales/working capital?

Answer 13

Sales/working capital

Question 14

Debt to equity?

Answer 14

Non-current liabilities/(Capital + reserves) * 100

Question 15

Debt to total capital?

Answer 15

Non-current liabilities/Capital employed * 100

Question 16

Operational gearing?

Answer 16

Fixed operating costs/Variable operating costs * 100

Fixed operating costs/Total operating costs * 100

Contribution/PBIT

Question 17

Interest coverage?

Answer 17

PBIT/Interest expense

Question 18

Cash flow coverage?

Answer 18

Cash generated from operations/Interest expense

Question 19

EPS?

Answer 19

Profit after tax-preference dividends/Weighted average number of ordinary shares in issue

Question 20

Diluted EPS?

Answer 20

(Profit after tax-preference dividends + FDS adjustments) / (Ordinary dividend + PDS)

Question 21

P/E ratio?

Answer 21

Ordinary share price/EPS

Question 22

Dividend coverage?

Answer 22

Profit after tax-preference dividends / total rodinary dividend

Question 23

Dividend payout ratio?

Answer 23

Ordinary dividend / Profit after tax-preference dividends

Question 24

Dividend yield?

Answer 24

Dividend per share/Market price per share * 100

Question 25

Earnings yield?

Answer 25

EPS / Ordinary share price * 100

Question 26

Total shareholder return?

Answer 26

(Year end share price - share price at start of year + dividends for year) / Share price at start of year (old price) * 100 ((Current share price + dividend for year)/share price at start of year) - 1

Question 27

Dividend for the year?

Answer 27

Interim dividend + final dividend

Question 28

Ex-div share price?

Answer 28

Cum-div - final dividend

Question 29

Benefit of high operational gearing (risk v reward)?

Answer 29

Greater risk but greater reward

Question 30

Contribution calculation?

Answer 30

Sales - variable costs

Question 31

Proportion of debt finance?

Answer 31

Debt/(Debt + Equity)

Question 32

Mean growth in EPS calcualtion?

Answer 32

n¬(final year/start year) - 1

Question 33

Is dividend coverage and dividend payout workings numerator and denominator flipped?

Answer 33

YES