Finance Ratios (NEW)

Question 1

Current ratio

Answer 1

Current assets ÷ current liabilities

Question 2

Acid test ratio

Answer 2

(Current assets - stock) ÷ current liabilities

Question 3

Gross profit margin

Answer 3

(Gross profit ÷ sales revenue) x 100

Question 4

Net profit margin

Answer 4

(Net profit ÷ sales revenue) x 100

Question 5

Return on capital employed (ROCE)

Answer 5

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

Question 6

Return on equity

Answer 6

(Operating profit ÷ total equity) x 100

Question 7

Gearing

Answer 7

Non-current liabilities ÷ (total equity + non-current liabilities) x 100

Question 8

Interest cover

Answer 8

Operating profit ÷ interest payable

Question 9

Receivables (debtor days)

Answer 9

(Trade receivables (debtors) ÷ sales revenue) x 365

Question 10

Payable (creditor days)

Answer 10

(Trade payables (creditors) ÷ cost of sales) x 365

Question 11

Asset turnover

Answer 11

Sales revenue ÷ net assets (assets - liabilities)

Question 12

Stock turnover

Answer 12

Cost of sales ÷ stock

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

Question 15

Dividend cover

Answer 15

Profit after tax ÷ dividends

Question 16

Earnings per share (EPS)

Answer 16

Profit after tax ÷ number of shares issued

Question 17

Price earnings ratio

Answer 17

Share price ÷ earnings per share