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6 Cards in this Set
- Front
- Back
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Gross profit percentage |
(Gross profit ÷ sales) × 100 Good: increasing Why? Increased selling price or costs less to make product |
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Net profit percentage |
(Net profit ÷ sales) × 100 Good: increasing Why? Expenses have decreased |
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Return on investment (ROI) |
(Net profit ÷ capital employed) × 100 Good: increasing Why? Improved performance, made more money |
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Working capital/ current ratio |
Current asset ÷ current liabilities Good: 2:1 Why? More cash than last year, may have paid back some of its bank overdraft |
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Acid test ratio |
(Current assets - closing stock) ÷ current liabilities Good: 1:1 Why? If less: illiquid Has more cash than last year, may have paid off its overdraft |
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Debt/equity ratio |
(Long tern debt[loans]+preference shares) ÷ (equity [ordinary] shares + retained earnings [reserves]) ideal Low gearing: <1:1 (borrowed less than invested) Good: no idealLow gearing: <1:1 (borrowed less than invested)Neutral gearing 1:1High gearing >1:1 (borrowed more than invested) Neutral gearing 1:1 High gearing >1:1 (borrowed more than invested) |
