Chapter 18: Interpretation of Profitability Ratios Flashcards
1
Q
Define profitability.
A
The ability of a business to earn a profit based on the use of recourses
2
Q
What is the formula for gross and net profit margin?
A
(Gross or net profit/sales revenue) x 100
3
Q
Define capital employed.
A
Capital employed is capital plus non-current liabilities
4
Q
What is the formula for Return on Capital Employed (ROCE)
A
ROCE is (profit for the year/capital employed) x 100
