Interpretation of Ratio Analysis 0.0 / 5 ? Business StudiesFinancial PlanningA2/A-levelAQA Created by: Sabeeha RemtullaCreated on: 25-01-15 13:04 Current Ratio Whether bus can pay debts from assets turned into cash in year / 1.5 - 2.0 = good, below 1 = bad 1 of 13 Acid Test Warning sign of liquidity problems for bus holding stocks / less than 1 = bad 2 of 13 Operating Profit Margin How efficiently bus turns sales into profits 3 of 13 Gross Profit Margin Whether bus. can 'add value' to production process / higher better 4 of 13 ROCE Amount of operating profit bus generates from total capital employed within bus. 5 of 13 Asset Turnover R/ship between rev & total assets employed / making assets work hard to make sales 6 of 13 Stock Turnover E.g. figure of 365 means turning stock into sale everyday - higher than avg = poor inventory management 7 of 13 Payables Days Estimates avg time taken for bus to settle debts with trade suppliers / higher the better - taking full advantage of time given 8 of 13 Receivables Days Time taken for trade debtors to pay bills / low generally better 9 of 13 Gearing Proportion of finance provided by debt relative to finance provided by equity 10 of 13 Dividends per share Value of total dividend per issued share for year 11 of 13 Dividend Yield Get sense of return on investment 12 of 13 EPS Overall profit generates for each share in existence over particular period 13 of 13
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