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Title: Ratio Analysis (A Level Standard)
Description: A list of methods of ratio analysis with clear descriptions, explanations and formulae. WITH FORMULA SHEET
Description: A list of methods of ratio analysis with clear descriptions, explanations and formulae. WITH FORMULA SHEET
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Ratios
Profitability ratios: Compares net profit from revenue employed
...
Gearing: Extent to which a firm is dependent on borrowing
...
Financial efficiency ratios: Analyse how well a firm uses its assets and
liabilities
...
Return on capital employed = (operating profit / capital employed) x100
- Higher is better
...
- Annual return on money invested as a %
...
5 : 1
- Higher means many resources not being used
...
Acid test ratio = (current assets - stock) : current liabilities
- Also known as quick ratio or liquid ratio
...
- Can pay debts without stock
...
Gearing = (long term loans / capital employed) x100
- 50% optimum
...
- High gearing = more risky investment
...
Financial efficiency ratios:
Stock (inventory) turnover = cost of goods sold / stock
- How many times a year a company replaces stock
...
Debtor days = (debtors / annual income) x365
- How long it takes for a company to collect debts
...
(Better for cash flow)
Creditor days = (creditors / cost of sales) x365
- Taking longer to pay suppliers is better
...
Shareholder ratios:
Earnings per share = profit after tax / number of shares
- Measures profit performance
- Meaningless alone - should compare to other years figures
Dividend per share = total dividend / number of shares
- Expressed in pence
- Shows money received for 1 share
...
• Gross profit margin = (gross profit / revenue) x100
• Return on capital employed = (operating profit / capital employed)
x100
• Current ratio (liquidity ratio) = current assets : current liabilities
• Acid test ratio = (current assets - stock) : current liabilities
• Gearing = (long term loans / capital employed) x100
• Stock (inventory) turnover = cost of goods sold / stock
• Debtor days = (debtors / annual income) x365
• Creditor days = (creditors / cost of sales) x365
• Asset turnover ratio = annual income : assets employed
• Earnings per share = profit after tax / number of shares
• Dividend per share = total dividend / number of shares
• Dividend yield = (share dividend / value of share(s)) x100
Title: Ratio Analysis (A Level Standard)
Description: A list of methods of ratio analysis with clear descriptions, explanations and formulae. WITH FORMULA SHEET
Description: A list of methods of ratio analysis with clear descriptions, explanations and formulae. WITH FORMULA SHEET