Financial ratio
1) Gross profit margin = (gross profit / turnover) * 100%
--> expresses operating profit before tax and interest
2) Net profit margin = (net profit / turnover) *100%
--> shows the firm's ability to control overhead
Liquidity ratio
1) Current ratio = (Current asset / currentliabilities)
--> assessets the firms liquidity
2) Acid test (quick ratio) = (current asset - inventory) / current liabilities
--> excludes stocks from current asset
ROCE (Return on capital employed)
1) ROCE = EBIT* / Capital Employed *Earnings Before Interest and Tax
--> the profit of a business as a percentage of the total amount of money used to generate it
2) Capital Employed = Total assets - current liabilities
Gearing / leverage ratios
1) Dept to equity ratio = total liabilities / shareholders equity
indicates what proportion of equidity and dept the company is using to finance its assets
2) Equity ratio = shareholder funds / total assets
--> company's overall financial strength
3) Debt Ratio= Total Dept / Total Asset
-->measures the extent of a company's or consumers leverage
http://www.investopedia.com
Paper by Mr. Medlock: Unit 56, Ratio Analysis
1) Gross profit margin = (gross profit / turnover) * 100%
--> expresses operating profit before tax and interest
2) Net profit margin = (net profit / turnover) *100%
--> shows the firm's ability to control overhead
Liquidity ratio
1) Current ratio = (Current asset / currentliabilities)
--> assessets the firms liquidity
2) Acid test (quick ratio) = (current asset - inventory) / current liabilities
--> excludes stocks from current asset
ROCE (Return on capital employed)
1) ROCE = EBIT* / Capital Employed *Earnings Before Interest and Tax
--> the profit of a business as a percentage of the total amount of money used to generate it
2) Capital Employed = Total assets - current liabilities
Gearing / leverage ratios
1) Dept to equity ratio = total liabilities / shareholders equity
indicates what proportion of equidity and dept the company is using to finance its assets
2) Equity ratio = shareholder funds / total assets
--> company's overall financial strength
3) Debt Ratio= Total Dept / Total Asset
-->measures the extent of a company's or consumers leverage
http://www.investopedia.com
Paper by Mr. Medlock: Unit 56, Ratio Analysis