Term
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Definition
| Financial Ratio is an examination of accounting data by relating one figure to another. This approach allows more meaningful interpretation of the data and the identification of trends. |
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Term
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Definition
| Measures the relationship between gross/net profit and revenue, assets and capital employed. They are sometimes referred to as performance ratios. |
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Term
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Definition
| These investigate the short term financial stability of a firm by examining whether there are sufficient short term assets to meet the short term liabilities (debts) |
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Term
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Definition
| Examines the extent to which the business is dependent upon borrowed money; it is concerned with the long term financial position of the company. |
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Term
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Definition
| These measure how efficiently an organisation uses its ratios and controls credit. |
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Term
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Definition
current assets
___________________
current liabilaties |
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Term
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Definition
non-current liabilities
________________________ x 100
capital employed |
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Term
| Gross Profit Margin Formula |
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Definition
Gross Profit
_____________ x 100
Revenue |
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Term
| Operating Profit Margin Formula |
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Definition
Operating Profit
________________ x 100
Revenue |
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Term
| Return on Capital Employed Formula |
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Definition
Operating Profit
________________ x 100
Capital Employed |
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Term
| Inventory Turnover Formula |
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Definition
cost of sales
______________________
average inventory held |
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Term
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Definition
trade payables
______________ x 365
cost of sales |
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Term
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Definition
trade debtor
____________ x 365
annual revenue |
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Term
| Profit for the Year Margin Formula |
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Definition
Profit for the Year
___________________ x 100
Revenue |
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Term
| Ways to improve current ratios |
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Definition
increase assets
reduce liabilities |
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Term
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Definition
increases non current liabilities
reduce capital employed |
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Term
| ways to improve return on capital employed |
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Definition
increase operating profit
reduce capital employed |
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Term
| ways to improve payable days |
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Definition
increase trade payables
reduce cost of sales |
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Term
| ways to improve receivable days |
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Definition
increase trade receivables
reduce annual revenue |
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Term
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Definition
1 Reason
2 Identification
3 Process
4 Calculation
5 Comparison
6 Interpretation
7 Action |
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Term
Current Assets = 20
Current Liabilities = 20
Find the Current Ratio |
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Definition
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Term
| What is the desired current ratios? |
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Definition
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