FINANCE - Profit and loss accounts -Profitability ratios 3.5 / 5HideShow resource informationBusiness StudiesFinanceGCSEAll boardsCreated by: macarenaCreated on: 29-04-09 19:08 Profitability Ratios GP MARGIN=Gp : turnover x 100 *for every one pound of sales the business makes (x) of Gp. NP MARGIN=Np : turnover x 100 *for every one pound of sales the business makes (x) of Np. ROCE= Np : Capital employed x 100 *for every one pound of sales the shareholders make (x) of Np. *Turnover=Sales revenue *Capital empleyed= share capital+reteined profit+reserves 1 of 4 Profit and Loss Accounts GROSS PROFIT= sales revenue-cost of sales *cost of sales=openingstock-closingstock+directcosts NET PROFIT= gross profit+other income-expenses *other expenses=(undirect costs, fixed costsand overheads) (rent, advertising, other wages payed by the business) RETAINED PRFIT=net profit-taxes-dividends *taxes=(corporation tax) *dividends=(profits paid to the shareholders) 2 of 4 Balance Sheet - This is what the business ows and owns. Includes assetas and liabilities. NET ASSETS=total assets-long term liabilities *long term liabilities= what the business ows in a year TOTAL ASSETS=net current assets+fixed assets *fixed assets=lands, buildings, electricity.. NET CURRENT ASSETS=current assets-current liabilities *current=(short term) less than one year *current assets=Stock, Debtos and Cash *current liabilities=everithing the business owes in a year (short term) 3 of 4 Liquidity Ratios CURRENT RATIO=Current assets : Current liabilities *The ability to pay short term debths. A result less than 1.5 would mean that the business would have cash flow problems. ACID TEST=(Current assets-stocks) : current liabilities *The ratio should be arround 1. less than 1 would mean that the business could not pay the short term debths from current assets. STOCK TURN OVER=Cost of sales : stocks *Measures how many times ina a finantial year the business is able to stock into sales. 4 of 4
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