Finance Ratios

Question 1

Gross profit margin

Answer 1

(Gross profit ÷ sales revenue) x 100

Question 2

Net profit margin

Answer 2

(Net profit ÷ sales revenue) x 100

Question 3

Return on capital employed (ROCE)

Answer 3

(Operating profit (or net profit) ÷ total equity + non current liabilities) x 100

Question 4

Return on equity

Answer 4

(Operating profit ÷ total equity) x 100

Question 5

Current ratio

Answer 5

(Current assets ÷ current liabilities)

Question 6

Acid test ratio

Answer 6

((Current assets - stock) ÷ current liabilities)

Question 7

Receivables (debtor) days

Answer 7

(Trade receivables ÷ revenue) x 365

Question 8

Payables days

Answer 8

(Trade payables ÷ cost of sales) x 365

Question 9

Asset turnover

Answer 9

(Sales revenue ÷ net assets (assets-liabilities))

Question 10

Stock turnover

Answer 10

Cost of sales ÷ stock

Question 11

Gearing

Answer 11

(Non current liabilities ÷ total equity + non current liabilities) x100

Question 12

Interest cover

Answer 12

Operating profit ÷ interest payable

Question 13

Dividend per share

Answer 13

Total dividends paid ÷ number of shares in issue

Question 14

Dividend yield

Answer 14

(Dividend per share ÷ share price) x 100

Question 15

Dividend cover

Answer 15

Profit after tax ÷ dividends

Question 16

Price earning ratio

Answer 16

Share price ÷ earnings per share

Question 17

Earnings per share

Answer 17

Profit after tax ÷ number of shares issued