Professional Documents
Culture Documents
PROFITABILITY
Measure
Calculation
Details
Gross Profit %
Expense/Revenue %
Operating Profit %
Return on Capital
Employed (ROCE)
Return on Shareholders
Funds
LIQUIDITY
Measure
Calculation
Details
Current Ratio
(sometimes called working
capital ratio)
Current Assets-Inventories/Current
Liabilities = ??? : 1
This ratio again uses figures from SFP without inventories for a
comparison between trade receivables and cash to current
liabilities. No less than 1 : 1. that is 1 of liquid assets to every
1 of current liabilities. (Liquid assets can be turned into cash
quickly) If a lower result than 1:1 this may mean that the
business would have trouble meeting its trade payables.
USE OF RESOURCES
Measure
Calculation
Details
Cost of Sales/Inventories
Trade Receivables
Collection Period
Revenue/Total Assets-Current
Liabilities = how many times
Measures the time between goods received into stock and the
collection of payment from customers in respect of the sale. If
the time has reduced it is a better position. If the time has
increased it is a worse position
Both this ratio and the one below measure efficient use of
assets in generating revenue. An increase from one year to the
next indicates greater efficiency. A falling result might be caused
by a drop in revenue or an increase in assets. You may have
increased stock or more trade receivables because of poor
credit control, so an increase is an improvement, a
decrease is a deterioration
See above
FINANCIAL POSITION
Measure
Calculation
Details
Interest Cover
Gearing