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A collection of ratios and formulas from Gowthorpe - Business Accounting and Finance
Performance Ratios
Gross Profit Margin |
Net Profit Margin |
Return on Capital Employed (ROCE) |
Efficiency Ratios
Fixed Asset Turnover |
Revenue / Fixed Assets |
Inventory Turnover |
Cost of Sales / Average Inventory |
Inventory Turnover in Days |
Average Inventory / Cost of Sales * 365 |
Trade Receivables Turnover |
Average Trade Receivables / Revenue on Credit * 365 |
Trade Payables Turnover |
Trade Payables / Purchases * 365 |
LENDING RATIOS
Gearing |
Debt / Equity |
Interest Cover |
Profit before Interest and Tax / Interest |
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Liquidity Ratios
Current Ratio |
Current Assets / Current Liabilities |
Quick Ratio |
Current Assets - Inventories / Current Liabilities |
Investor Ratios
Dividend Per Share |
Dividend for the Year / No. of Shares issued |
Dividend Cover |
Profit after Tax / Dividend |
Earnings Per Share |
Profit after Tax / No. of Shares |
Price Earning or P/E |
Price of Share / Earnings Per Share |
Profit after Tax refers to amount available to give to oridinary shareholders. Premium not included.
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Terms of Accounting
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Recognition Revenue is not the same as received and Expenditure is not the same as cash paid.
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Accruals (Matching) Estimating the value to be paid and adding that as an expense in the Financial Statements and making any adjustments later on.
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Bad & Doubtful Debts Bad & Doubtful Debts are added to Expenses in SFP. However, Doubtful debts are deducted from Receivables in Income Statement
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Net Realisable Value The value inventory holds (not cost price or selling price)
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