Accounting Ratios

Gross proft margin:

Gross Profit / Sales x 100 = x%

Net profit margin:

Net Profit / Sales x 100 = x%

Expenses ratio:

the difference between the above e.g

GPM = 72%, NPM = 50%, expenses ratio = 22%

Markup:

Gross profit / cost of sales x 100 = x%

Return on capital employed:

Profit before tax / capital employed* x 100 = x%

*capital employed is anything providing long term finance e.g loans, debentures, share capital

Current or Current Asset Ratio:

Current assets / current liabilities = x:1

Liquid or Acid test raio:

current assets-stock / current liabilities = x:1

Debtor collection period:

Debtors / credit sales x 365 = no. of days

Creditor payment period:

creditors / credit purchases x 365 = no. of days

Stock turnover:

average stock / cost of sales x 365 = no. of days