Questions Flashcards
(22 cards)
What does ROCE show?
How effectively a company uses its capital
What does ROCE stand for?
Return on capital employed
In what form should the answer to profit margin questions be expressed as?
A percentage
How do we calculate the Operating Profit Margin?
Operating profit margin = operating profit ÷ revenue X 100
How do we calculate the Gross Profit Margin?
Gross Profit Margin = gross profit ÷ turnover X 100
If the current ratio is 1.25 what conclusions can be drawn from this?
The company will be able to pay off its debts but it might be in trouble if all creditors come at once
What does the current ratio show?
The current ratio shows a company’s ability to pay short-term obligations
What are the 3 categories of ratio analysis?
Liquidity ratios Profitability ratios and Mark up ratios
What does equity mean?
What shareholders have invested in the business
What will always be equal to net assets?
Net liabilities
How are net assets educated?
Net assets = liabilities + equity
Whats the difference between Current and non current?
Current will be used in the year non current wont
Give 3 examples of current assets
Flour, butter, baking powder
Give 3 examples of non current assets
Branding, trademarks, intellectual property
What are the 3 basic elements of the balance sheet?
Assets, liabilities and captial
What does a balance sheet show?
A balance sheet reports the amounts of a company’s assets, liabilities, and owner’s equity
How is operating profit calculated?
Operating profit = Gross profit - expenses
What is operating profit?
Shows the amount spend on overheads and management
How is gross profit measured?
Gross profit = Revenue - cost of sale
What is meant by cost of sale?
Cost of sales is the direct costs attributable to the production of the goods
What does gross profit show?
Gross profit is the profit a company makes after deducting the costs associated with making and selling its products
What does an income statement show?
How a business has preformed in terms of profitability over a given time
