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Ratios Flashcards

(23 cards)

1
Q

Profit - What ratio tells us

A

The ability to earn profits

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2
Q

debt to equity

A

How much our business is externally funded

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3
Q

Debt to equity - how to analyse ratio

A
  • As low as possible
  • 100%+ = highly geared
  • -100% = lowly geared
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4
Q

Debt to equity - possible actions

A
  • Repay loans
  • Increase equity
  • reduce drawings
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5
Q

Quick asset - what the ratio tells us

A

Ability to pay debts within the next 3 months

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6
Q

Quick asset - how to analyse ratio

A

Between 100%-150% is good

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7
Q

Quick asset - possible actions

A
  • Get finance from long term loan
  • sell unimportant assets
  • sell inventory for cash
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8
Q

Current/working capital - what ratio tells us

A

Ability to pay debts in the next 12 months

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9
Q

Current/working capital- how to analyse ratio

A

Between 100-200%

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10
Q

Current/working capital- possible actions

A
  • get a long term loan

- review debtors

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11
Q

What is liquidity

A

The ability to pay debts

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12
Q

What is financial stability

A

How outlet sets have been financed internally/externally

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13
Q

What is profitability?

A

The ability to earn profits

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14
Q

Rate of returns on assets - possible actions

A
  • increase efficiency in assets

- gross profit could be too low

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15
Q

Profit - How to analyse Ratio

A
  • higher the better

- has to be positive

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16
Q

Profit - Possible actions

A
  • reduce expenses

- increase gross profit ratio

17
Q

Gross Profit - What ratio tells us

A
  • Whether mark-up is sufficient
18
Q

Gross Profit - How to analyse ratio

A
  • higher the better

- should be positive

19
Q

Gross Profit - Possible Actions

A
  • Increase prices

- Cheaper suppliers

20
Q

Expenses - What ratio tells us

A

How much expenses are compared to the dollar sale

21
Q

Expenses - How to Analyse Ratio

A
  • lower the better
22
Q

Expenses - Possible Actions

A
  • reduce operating expenses
23
Q

Rate on Return of Asset - What ratio tells us

A

how much profit our assets are generating