Profitability Flashcards
(9 cards)
what is the return on capital employed (ROCE) formula ?
operating profit/capital employed x100%
what parts of the income statement can be used as capital employed ?
Retained profit,
reserves,
share capital,
share premium
non-current liabilities
what does ROCE compare ?
it compares inputs (investments) with out puts (operating profit)
what does the ROCE assess ?
the effectiveness of the funds that have been deployed during accounting period
what is the gross profit margin formula ?
gross profit/sales x 100%
what does the GP margin show ?
what a company made after paying off its cost of goods sold
what does the GP margin show about a company ?
Companies with a high gross profit margin are more liquid
and have more money to spend on indirect expenses
what is the operating profit margin ?
operating profit/sales x 100%
