Ratios Flashcards
(17 cards)
State the different types of ratios?
Activity ratios
Liquidity ratios
Solving ratios
Profitability ratios
Outline the activity ratios
Inventory turnover
Average collection period
Average payment period
What is inventory turn over
COGS/ Average inventory
A measure of the number of times inventory is sold or used in a time period
What is average collection period
Average debtors/ credit sales x 365
This represents the average length for days of time a business must wake after a sale before receiving cash
What is average payment period
Average creditors/ COGS x 365
Outline the liquidity ratios
Working capital
Current ratio
Quick ratio
What is working capital ratio
Current assets - current liabilities
What is current ratio
Current assets/current liabilities
What is quick ratio
Current assets - stock and prepayments/ current liabilities
Outline solving ratios
Debt to equity
Debt ratio
Gearing ratio
Interest cover ratio
What is debt to equity
total debt/ owners equity x 100
What is debt ratio
Total debt/ total assets
What is gearing ratio
Long-term loans + preference shares/ ord.share capital + reserves + pref.shares + long-term liabilities
What is interest cover ratio
earnings before interest on tax/ interest charges x 100
Outline profitability ratios
Gross profit margin
Net profit margin
What is gross profit margin
Gross profit/ sales x 100
What is net profit margin
Net profit/sales x 100
