BUSS3 Formula...

BUSS3 Formula...

1. Current Ratio

   • Liquidity ratio
   • A current ratio between 2 and 3 is ideal
   • Less than 2 may have liquidity problems more than 2 means has too much money in current assets - opportunity cost.
   • Current Assets / Current liabilities

2. ACID test

   • Liquidity ratio
   • Is a tougher test to see business ability to pay bills.
   • Depends on business a figure less than one would highlight serious problem
   • (Current Assets - Stock)/ Current liabilities

3. Gross Profit Margin

   • Profitability Ratio
   • Higher the figure the better!
   • Only shows profit before overhead costs have been taken.
   • (Gross Profit/Sales Revenue) X 100

4. Operating Profit Margin

   • Profitability Ratio
   • (Operating Profit/ Sales Revenue) X 100
   • Highest possible % is preffered here.
   • If the % is decreasing the expenses for firm have increased.

5. ROCE

   • Return on Capital Employed
   • (Operating profit/Capital employed) X 100
   • Profitability Ratio
   • Figure needs to be as high as possible
   • A low figure could deter investors