Chapter 6 - Performance measure and Budgetary Control

Question 1

Key metrics

Profitability

Answer 1

Profitability (profit/sales)
ROCE (return on capital employed)
Asset turnover (turnover/capital)

Capital employed: equity + long-term finance

Question 2

Key metrics

Liquidity
Investments
Residual Income
contribution to sales ratio

Answer 2

current ratio: assets/liabilities
quick ratio: (assets-inventory)/liabilities

residual income: Profit - (capital employed x cost of capital)
EVA: NOPAT - (capital employed x cost of capital)
C/S ratio is: (sales revenue - cost of sales) / sales revenue x 100