Ratio

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  • Created by: 13ryana
  • Created on: 27-02-18 11:15
How do you work out the gross profit margin
gross profit/ sales revenue x 100
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How do you work out the net profit margin
net profit/ sales revenue x 100
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How do you work out the return capital employed
Net profit/ Capital Employed x 100
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How do you work out current ratio
Current assets/ current liabilities
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What does gross profit show
Gross profit for £1 of sales. The bigger the % the greater the profit
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What does net profit show
As above, but allowing for fixed costs
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What does return capital employed (ROCE) show
Profit created from each £1 invested
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What does current ratio show
How easily a firm's short - term debts can be paid from current assets
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How do you work out acid test ratio?
Current assets - stock/ current liabilities
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What does acid test ratio show ?
Removes stock from the equation to give a more realistic measure
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Who is interested in the gross profit ?
Managers - how is the firm performing ?, Creditors - will loans be repaid?
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Who is interested in net profit margin ?
Stakeholders want to know if the business is making profit
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Who is interested in return on capital employed (ROCE)
Shareholders - is investment providing as good a return as other options
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Who is interested in current ratio
Managers, creditors - how easily can the firms debts be covered?
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Who is interested in acid ratio test
Managers, creditors - how easily can the firms debts be covered?
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Other cards in this set

Card 2

Front

How do you work out the net profit margin

Back

net profit/ sales revenue x 100

Card 3

Front

How do you work out the return capital employed

Back

Preview of the front of card 3

Card 4

Front

How do you work out current ratio

Back

Preview of the front of card 4

Card 5

Front

What does gross profit show

Back

Preview of the front of card 5
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