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OU MBA B716 > Unit 3 - Ratios > Flashcards

Unit 3 - Ratios Flashcards

1
Q

How is Gross Profit calculated?

A

Sales - Cost of Goods Sold = Gross Profit

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2
Q

What is COGS?

A

Cost of Good Sold

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3
Q

How is COGS calculated for a trading organisation?

A

Inventory at Year Start
+ Product Bought During Year
- Residual Inventory at Year End
= COGS

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4
Q

How is COGS calculated for a manufacturing organisation?

A

Year Start Raw Material
+ Raw Material bought during year - Year End Raw Material
+ Year Start Work-in-Progress - Year End Work-in-Progress
+ Year Start Finished Goods - Year End Finished Goods.
= COGS

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5
Q

What does EBIT stand for?

A

Earnings Before Interest and Tax

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6
Q

What is another term for EBIT

A

Net Operating Income

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7
Q

How is EBIT calculated?

A 
Gross Profit 
- Marketing Expenses 
- Administration Expenses 
- Depreciation 
- Other Operating Costs
= EBIT
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8
Q

How is Profit before taxes from continuing operations calculated?

A

EBIT
- Results from investments in other companies
- Bank Loan interest
= Profit before taxes from continuing operations

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9
Q

How is Profit for financial year calculated?

A

Profit before taxes from continuing operations
-Tax payable
- Net income from discontinued operations
= Profit for financial year

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10
Q

What is Return On Sales?

A

EBIT as a percentage of sales

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11
Q

How is Return On Sales calculated?

A

ROS (in %) = (EBIT/Sales) * 100

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12
Q

What does the Asset Utilisation Ration show?

A

Revenues generated as a proportion of total assets used to generate said revenues

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13
Q

How is AUR calculated?

A

sales/capital employed

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14
Q

How is Capital Employed calculated?

A

Shareholders funds + long-term debt

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15
Q

What is ROCE

A

Return on Capital Employed.

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16
Q

What is ROS

A

Return on Sales

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17
Q

How is ROCE calculated?

A

ROCE (in %) = (EBIT/Capital Employed) * 100
or
ROCE (in %) = (EBIT/Sales) * (Sales/Capital Employed) * 100

Which is
ROCE = ROS * AUR

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18
Q

Is AUR an effectiveness or efficiency ratio?

A

Efficiency

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19
Q

Is ROCE an effectiveness or efficiency ratio?

A

Both

20
Q

Is ROIS an effectiveness or efficiency ratio?

A

Effectiveness

21
Q

What is an ORPI?

A

Output-Related Performance Index

22
Q

What type of orgnanisation might use an ORPI?

A

NFP/Service Sector

23
Q

What does the Current Ratio show?

A

Level of current assets relative to current liabilities.

24
Q

How is Current Ration calculated?

A

Current Ratio = current assets / current liabilities.

25
Q

What does the Quick Ratio show?

A

Level of current assets relative to current liabilities. ignoring inventory in current assets

26
Q

How is the Quick Ratio calculated?

A

Quick Ratio = (current assets - inventory) / current liabilities.

27
Q

What is Working Capital?

A

margin of safety between current assets and current liabilities

28
Q

How is Working Capital calculated?

A

Working Capital = current assets - current liabilities

29
Q

What does Leverage show?

A

Relative dependence on debt and equity

30
Q

How is Leverage calculated?

A

Leverage = (short-term debt + long-term debt) / shareholders’ funds

31
Q

What does Gearing show?

A

European version of debt/ equity ratio

32
Q

How is Gearing calculated?

A

((short-term debt + long-term debt) /(short-term debt + long-term debt + shareholders’ funds)) * 100

33
Q

What is Creditor Days?

A

How long it takes an org. to pay its creditors

34
Q

How is Creditor Days calculated?

A

Creditor Days = (Creditors / COGS) * 365 days

35
Q

What is Stock or Inventory Days

A

How long stock/inventory takes to become output product/service

36
Q

How is Stock (or Inventory) Days calculated?

A

Stock Days = (Stock / COGS) * 365 days

37
Q

What is Debtor Days?

A

How long it takes an org to get paid.

38
Q

How is Debtor Days calculated?

A

(Debtors / Sales) * 365 days

39
Q

What is ROE?

A

Return On Equity

40
Q

What does ROE show?

A

Net profit for the year as a proportion of shareholders’ funds - shows the organisation’s performance taking equity into account.

41
Q

How is ROE calculated?

A

ROE (in %) = (Net Profit for Financial Year / Shareholders’ Funds) * 100

42
Q

What does the Payout Ratio show?

A

Percentage of after-tax profits paid to shareholders as dividends

43
Q

How is Payout Ratio calculated?

A

Payout Ratio (in %) = (Dividends / Profit for Financial Year) * 100

44
Q

What does Interest Cover show?

A

Interest Cover shows whether an organisation is producing enough operating profit to cover its interest payments.

45
Q

How is Interest Cover calculated?

A

Interest Cover = EBIT / Interest Expense

46
Q

What is the P/E Ratio?

A

Profit/Earnings Ratio. Shows the market price as a proportion of earnings per share.

47
Q

How is P/E calculated?

A

P/E Ratio = Market Price / Earnings Per Share

OU MBA B716 (6 decks)

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