# Ratios

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Gross profit margin
Gross profit/sales turnover x 100
1 of 23
Net profit margin
Net profit/sales turnover x 100
2 of 23
Return on capital employed
net profit/capital employed x 100
3 of 23
Stock turnover
stock/purchases x 365
4 of 23
Current asset ratio
current assets/current liabilities
5 of 23
Acid test ratio
current assets-stock/current liabilities
6 of 23
Debtors collection period
debtors/revenue x 365
7 of 23
creditors payment period
creditors/cost of sales x 365
8 of 23
Price earnings ratio
market price/earnings per share=x times
9 of 23
Return on Equity
Profit accruing to ordinary shareholders/ordinary share capital + reserves x 100 = x%
10 of 23
Earnings per share
Profit accruing to ordinary shareholders/number of ordinary shares = x pence
11 of 23
Dividend per share
Total dividends payable or received/number of shares issued= x pence
12 of 23
Dividend cover
Profit accruing to ordinary shareholders/dividends=x times
13 of 23
Dividend yield
Dividend paid on ordinary shares/market price per share x 100 = x%
14 of 23
Gearing
Long term loans/capital employed x 100 = x%
15 of 23
Interest cover
Profit before interest and tax/Interest = x times
16 of 23
What is said to be the ideal for current ratio?
1.5 to 2:1
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What is said to be the ideal for acid test ratio?
1:1
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What does interest cover measure?
It measures the number of times profit covers any interest payable on loans
19 of 23
What does gearing measure?
It measures the extent to which a business is dependent on borrowed funds for its financial stability
20 of 23
What does debt collection period measure?
It measures the number of days it takes a business to collect any money owed by it's customers (its debtors)
21 of 23
What does net profit margin measure?
It measures what percentage of a firm's sales revenue is net profit.
22 of 23
What does return on capital employed measure?
It expresses the profit of the business as a percentage of the capital invested.
23 of 23

## Other cards in this set

### Card 2

#### Front

Net profit margin

#### Back

Net profit/sales turnover x 100

### Card 3

#### Front

Return on capital employed

Stock turnover

### Card 5

#### Front

Current asset ratio