What The Ratio Analysis Terms Mean

Question 1

What is a gross profit margin

Answer 1

Expresses gross profit as a percentage of sales

Question 2

What is a gross profit mark-up

Answer 2

Calculates gross profit as a percentage of the cost of sales

Question 3

What is a net profit margin

Answer 3

Shows net profit as a percentage of sales revenue

Question 4

What is return on capital employed (ROCE)

Answer 4

Shows the percentage return a business is achieving from the capital invested

Question 5

What is a current ratio show?

Answer 5

The ratio shows a business that amount of current assets it owns in relation to the amount of current liabilities it owes

Question 6

What does liquid capital ratio show?

Answer 6

The ratio gives a more accurate reflection of the true liquidity of a business as it removes the least liquid of all current assets from the equation

Question 7

What does trade receivable days ratio show?

Answer 7

This ratio measures, on average how long it takes for customers to pay and is expressed as a number of days

Question 8

What does trade payable days ratio show?

Answer 8

This ratio shows on average how long it takes firm to pay suppliers for goods and services bought on credit and is expressed as a number of days

Question 9

What does an inventory turnover ratio show?

Answer 9

The ratio shows an average amount of time and item of stock is held by a business and is expressed by number of days.