Ratio Analysis Flashcards
(16 cards)
what is the formula for gross profit margin
Gross profit/revenue x 100
what is the formula for gross profit mark-up
Gross profit/cost of sales x 100
what is the formula for expenses in relation to revenue
Expenses/revenue x 100
what is the formula for profit in relation to revenue
profit before tax/revenue x 100
what is the formula for return on capital employed(sole trader)
profit before interest/capital employed x 100
what is the formula for return on capital employed (limited company)
profit from operations/capital employed x 100
what is the formula for current ratio
current assets/current liabilities
what is the formula for liquid capital ratio
current assets-inventory/current liabilities
what do liquidity ratios measure
the financial stability of the business, is there enough cash to cover day to day expenditure?
what are efficiency ratios measuring
how well the management of the business controls the current assets and liabilities of the business
what is the formula for rate of inventory(times per year)
cost of sales/average inventory
what is the formula for rate of inventory(days)
Average stock/cost of sales x 365
what is meant by average stock
opening + closing/2, if no opening the simply use closing
what is the formula for trade receivable days
(Trade receivables /credit sales) x 365
what is the formula for trade payable days
(trade payables/credit purchases) x 365
what are limitations of ratio analysis
-comparing like with like
-difference in accountancy policies
-inflation
-limited information
-non-financial factors
