Financial Ratios Flashcards
(11 cards)
Liquidity ratio
Current assets ÷ current liabilities
(2:1 is acceptable)
Gearing ratio
Total liabilities ÷ total equity
1:1 indicates equal reliance
0.6:1 is usually a safe financial position in most industries
Gross profit ratio
gross profit ÷ sales
for every dollar $x of gross profit was generated
Gross profit
revenue - COGS
COGS
opening stock + purchases - closing stock
Net profit ratio
Net profit ÷ sales
for every $1 in sales, $x of net profit was generated
Net profit
gross profit - total expenses
Return on Owners Equity ratio
Net profit ÷ total equity
for every $1, $x of profit was generated
Expense ratio
Total expenses ÷ sales
for every $1 of sales, $x was spent on expenses
Accounts Receivable turnover ratio
sales ÷ Accounts receivable = x
365 ÷ x = days on average accounts receivable are collected
Current
within 12 months
