Ratios Flashcards
Return on capital Employed
ROCE
Operating Profit
/ equity + non-current debt x 100
The higher the ratio the better
Return on assets
ROA
Operating profit
/total assets x 100
The higher the ratio the better
Return on Equity
ROE
FISH ROE - in NET
NET PROFIT
/total shareholders equity x 100
The higher the ratio the better
Operating profit margin
MOGN
Operating Profit
/ Revenue x100
The higher the ratio the better
Gross profit margin
MONG
Gross profit
/revenue x100
The higher the ratio the better
Net Profit Margin
The higher the ratio the better
Net Profit
/revenue x100
The higher the ratio the better
Current Ratio
Liquidity ratio
Current assets
/current liabilities
Target: 2:1
Less Than 1:1 indicates liquidity problems
Acid ratio
Current assets - inventory
/ current liabilities
Target 1:1
Total Asset turnover
Measures the ability to generate sales/revenue from asserts
Revenue
/net or total assets
Shown as times
Inventory holding period (days)
Inventory
/cost of sales x 365
Cost of sales = revenue - gross profit
The shorter the period the better
Rate of Trade receivables
Trade receivables
/credit sales or (revenue - cash sales) x365
Shorter is better
Rate of trade payables
Trade payables
/credit purchases (or cost of goods sold) x365
Longer is better
Working capital cycle
PAID AT THEN OF THE WORKING MONTH
Inventory holding period
+ trade receivables collection period
- trade payables payment period
Inventory turnover
Cost of good sold
/inventory
Shown as times
Capital Gearing
Debt
/capital employed x100
