Financial Ratios

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  • Financial Ratios
    • Gross Profit
      • Current Assets- Current Liabilities
    • Net Profit
      • Gross Profit - Expenses
    • Gross Profit Margin
      • Gross Profit / Sales Revenue * 100
        • This compares the gross profit with the sales. The higher the figure the better. 56% means that for every £1 of sales, 56p is the gross profit.
          • This enables the business to assess the impact of its sales and how much those sales cost.
          • Factors affecting: How many units sold, Price of the prducts, Price the suppliers charge
            • Reduce the cost of the sales
    • Net Profit Margin
      • Net Profit / Sales Revenue * 100
        • This compares the net profit with the sales made. the higher the figure the better. 32% means that for every £1 of sales 32p is the net profit made.
          • Factors affecting: Wages, rent, cost of supplies, bills
            • Reduce the expenses
          • Takes into account the fixed costs involved.
    • Return of Capital Employed (ROCE)
      • Net Profit Before Tax / Capital Employed *100
        • Untitled
    • Current Ratio
      • Current Assets / Current Liabilites
    • Acid Test
      • (Current Assets - Stock) / Current Liailities

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