ratios business Flashcards
(5 cards)
1
Q
What does Return on Capital Employed (ROCE) measure?
A
Measures the return on the capital invested
ROCE is calculated as (Net profit / capital employed) x 100
2
Q
How is the Gross Profit Margin (GPM) calculated?
A
(Gross profit / sales revenue) x 100
GPM indicates the percentage of gross profit from sales.
3
Q
What does Net Profit Margin (NPM) show?
A
Shows the percentage of net profit from sales
NPM is calculated as (Net profit / sales revenue) x 100.
4
Q
How is the Current Ratio defined?
A
Current assets / current liabilities
The Current Ratio measures current assets against current liabilities.
5
Q
What is the Liquid Ratio (Acid Test Ratio)?
A
(Current assets - inventory) / current liabilities
The Liquid Ratio is similar to the Current Ratio but excludes inventory.
