RATIOS

Denise Harper
Flashcards by Denise Harper, updated more than 1 year ago
Denise Harper
Created by Denise Harper about 6 years ago
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Acca f9 Flashcards on RATIOS, created by Denise Harper on 09/01/2014.
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Question Answer
Current ratio Current Assets/Current Liabilities
Acid-test ratio (CA-Stock)/CL
Raw materials stock period Average value of raw materials/usage of raw materials per day
WIP period Average value of WIP /cost of goods sold per day
Finished goods period Average value of fin goods /cost of goods sold per day or: Stock/cost of goods sold x 365
Debtor turnover average value of debtors/ average value of sales per day or: Debtors/sales x 365
Creditor turnover average value of creditors/ purchases on credit per day or: Creditors/purchases x 365
ROCE profit Before Interest & Tax ÷ Capital Employed Capital Employed is : (Shareholders' funds + long-term liabilities) or (Total Assets -Current Liabilities)
What should you look at with ROCE ? 1. Change from oneyear to next 2. Roce earned by other companies 3. Compare with current market borrowing rates . nb: Roce often reflect higher risk than borrowings. i) What would the cost of extra borrowing to the company be if neededand is it earning an Roce that suggests itcould make enough profits to make such borrowing worthwhile ? ii ) Is the company making a Roce which suggests that it is making profitable use of its current borrowing ?
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