Business Accounting Formulas Essay

302 words - 2 pages

UKAF 1073 BUSINESS ACCOUNTING 2 – LECTURE 8 Page 1 of 2

DEFINITION OF RATIOS (TO BE USED FOR GROUP ASSIGNMENT AND FINAL EXAMINATION)

|CATEGORY |TYPES |DEFINITION |
|PROFITABILITY |Gross profit margin |Gross profit x 100% |
|(expressed in %) | |Sales |
| | | ...view middle of the document...

|Return on assets | |
| | |Profit after tax x 100% |
| | |Total Assets |
| |Return of capital | |
| |Employed (ROCE) |Profit before interest and tax x 100% |
| | |Shareholders’ Funds |
|EFFICIENCY |Fixed assets turnover |Sales / Fixed assets at NBV (x) |
| | | |
|OR ASSET MANAGEMENT |Total assets turnover |Sales / Total assets at NBV (x) |
| | | |
|OR TURNOVER |Inventory turnover |Cost of Sales / Inventory (x) |
| | | |
| |Inventory turnover days |[Inventory / Cost of Sales] x 365 days (days) |
| | | |
| |Trade debtor days | |
| | |[Trade debtors / Sales] x 365 days (days) |
| |Trade creditor days | |
| | |[Trade creditors / Total credit purchases *] x 365 days (days) |
| | |* can use cost of sales only if the purchases figure cannot be computed |
| | |from available data |
|LIQUIDITY (SHORT TERM |Current ratio |Current assets / Current liabilities (x) ...

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