Profitability Ratios Flashcards Preview

A Level Business Studies - Accounting And Finance > Profitability Ratios > Flashcards

Flashcards in Profitability Ratios Deck (12):
1

What is the gross profit margin formula

Margin % = (gross profit / sales revenue) x 100

2

What does the answer from the gross profit margin formula show

The % of the £ earned that isn’t in the cost to produce the product

3

What is the net profit margin formula

(Net profit before tax / sales revenue) x 100

4

Define return of capital employed (ROCE)

Tells us what returns the business has made on the current resources available to it

5

How do you work out ROCE

(Operating profit / capital employed) x 100

6

What are the sections of capital employed

Share capital + retained earnings + LT borrowing

7

How do you work out the return of equity

Yearly profit / shareholder equity

8

What does the return of equity calculation show you

How much profit is made per pound of shares

9

What are the names of the 4 efficiency ratios you need to know

1. Gross profit margin % formula
2. Net profit margin % formula
3. Return of equity
4. Return on capital employed (ROCE)

10

What formula is - (gross profit / sales revenue) x 100

Gross profit margin formula %

11

What calculation is 0 (net profit before tax / sales revenue) x 100

Net profit margin %

12

What equation is - yearly profit / shareholder equity

Return on equity