What is capital Gearing?
Name: Capital Gearing
Formula: Non-current Liabilities /Issued share Capital + Reserves + Non-current liabilities
Explanation: Capital Gearing compares the amount of debt to a company’s capital
What is Current Ratio?
Name: Current Ratio
Formula: Current assets/Current liabilities
Explanation: This is a liquidity ratio. It measures whether a firm has enough resources to meet its short-term obligations
What is Gross Profit?
Name: Gross Profit Margin
Formula: Expenses/Revenue * 100
Explanation: This is the difference between revenue and the cost of goods
What is Liquid Capital Ratio?
Name: Liquid Capital Ratio or Acid Test Ratio
Formula: Current Assets – Inventory / Current Liabilities
Explanation: This shows the number of times the short term debt obligations are covered by liquid assets
What is Markup?
Name: Gross Profit Markup
Formula: Gross Profit / Cost of Sales * 100
Explanation: the amount added to the cost price of goods to cover overheads and profit
What is profit in relation to revenue?
Name: Profit in relation to revenue
Formula:Profit for year(before tax) / Revenue
Explanation: total amount of income generated by the sale of goods or services related to the company’s primary operations
What is Rate of Inventory Turnover?
Name: Rate of inventory turnover
Number of times
Formula: Cost of sales / (opening inventory + closing inventory/2)
Number of days
Formula: (opening inventory + closing inventory/2) / Cost of sales * 365
Explanation: The number of times inventory is sold or used in a time period such as a year.
What is return on capital employed?
Name: Return on capital employed
For sole trader
Formula: Profit before interest / Equity + non-current liabilities
For Limited Companies
Formula: Profit from operations / Equity + non-current liabilities
Explanation: compares the relative profitability of companies after taking into account the amount of capital used
What is Trade payable in days?
Name: Trade Payable Days
Formula: Trade Parables / Credit Purchases* 365
Explanation: The number of days it takes a business to settle its debts with trade suppliers.
What is Trade Receivables in days?
Name: Trade Receivable Days
Formula: Trade Receivables / Credit sales * 365
Explanation: The number of days that a customer invoice is outstanding before it is collected