Ratios

Question 0

Gross Margin Ideal result

Answer 0

As high as possible

Question 1

Gross Margin formula

Answer 1

Gross sales
—————— X
Sales

1

Question 2

Other names for gross margin

Answer 2

Gross profit percentage

Question 3

Gross margin determines

Answer 3

Profitability

Question 4

Net margin formula

Answer 4

Net profit
——————— x
Sales.

                                100
                               -----
                                  1

Question 5

Net margin ideal result

Answer 5

As high as possible

Question 6

Net margin is also known as …?

Answer 6

Net profit percentage

Question 7

Net margins determines

Answer 7

Profitability

Question 8

Return on investment formula

Answer 8

Capital employed

X 100
—–
1

Question 9

Return on investment ideal result

Answer 9

Greater than return on a bank account

Question 10

Another name for return on investment …

Answer 10

Return on capital employed

Question 11

Return on investment determines..?

Answer 11

Profitability

Question 12

Current ratio formula

Answer 12

Current assets : current liabilities

Question 13

Current ratio ideal result

Answer 13

At least 1.5 : 1

Question 14

Current ratio is also known as

Answer 14

Working capital ratio

Question 15

Current ratio determines …?

Answer 15

Liquidity

Question 16

Quick ratio formula

Answer 16

Current assets - stock : current liabilities

Question 17

Quick ratio ideal result

Answer 17

At least 1:1

Question 18

Quick ratio is also known as

Answer 18

Acid test ratio

Question 19

Quick ratio determines

Answer 19

Liquidity

Question 20

Gearing formula

Answer 20

Equity capital

X 100
——
1

Question 21

Possible gearing results

Answer 21

> 50% high
<50% low
= 50% neutral

Question 22

Ideal gearing result

Answer 22

Dependent on sector company Is in

IN GENERAL: High gearing is bad as company is considered more risky

Question 23

Definition of gearing

Answer 23

A general term describing a financial ratio that compares some form of owner’s equity (or capital) to borrowed funds. Gearing is a measure of financial leverage, demonstrating the degree to which a firm’s activities are funded by owner’s funds versus creditor’s funds.

Question 24

Other terms used for gearing

Answer 24

Leverage ratio | Debt ratio

Question 25

Gross profit percentage formula

Answer 25

Gross profit ----------------- Sales. X 100 ----- 1

Question 26

Net profit percentage ratio

Answer 26

Net profit. ------------- Sales. X 100/1 Same as net margin

Question 27

Return on capital employed ratio formula

Answer 27

Net profit ---------------------- Capital employed. X 100/1 Same as return on investment

Question 28

Working capital ratio formula

Answer 28

Current assets : current liabilities Same as current ratio

Question 29

Acid test ratio formula

Answer 29

Current assets - stock : current liabilities Same as quick ratio

Question 30

Leverage ratio formula

Answer 30

Fixed interest capital. -------------------------- Equity capital X 100/1 Same as gearing and debt retro

Question 31

Debt ratio formula

Answer 31

Fixed interest capital ------------------------- Equity capital. X 100/1 Same as gearing and leverage ratio

Question 32

Capital employed formula

Answer 32

``` Ordinary share capital (given) Preference share capital (given) Reserves +Long term liabilities ____________________ ```

Question 33

Fixed interest capital formula

Answer 33

Preference share capital ( given ) +Long term liabilities ______________________

Question 34

Equity capital formula

Answer 34

Ordinary share capital ( given ) | + reserves

Question 35

Define a debenture loan

Answer 35

A long term loan