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Description
Flashcards by jakeyboihc, updated more than 1 year ago
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Created by jakeyboihc
over 8 years ago
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| Question | Answer |
| Return on Capital Employed (%) | To assess whether the business is making a satisfactory level of profit from the capital it has available to it. |
| Current Ratio (2 points) | 1. To see if a business is likely to run short of liquid assets in the short term. 2. To ascertain whether a cash-flow problem might occur in the short-term. |
| Acid Test Ratio (2 points) | 1. To see if the business has sufficient liquid assets in the short-term, even if it has difficulties in selling its stocks (inventories). 2. To ascertain whether a cash-flow problem might occur in the short term, especially if the business cannot rely on receiving cash from selling its inventories. |
| Gearing (%) (3 points) | 1. To measure how reliant a business is on borrowed money. 2. To study the likely impact on the costs of a business if there are changes in interest rates. 3. To gauge whether a business may be vulnerable for having to repay loan in the next few years. |
| Asset Turnover | To measure the efficiency of a business in terms of how well it uses its assets to generate sales revenue. |
| Inventory Turnover (2 points) | 1. To calculate how many times a year a business is able to sell its stock. 2. To measure the speed at which a business is able to convert its inventories into sales. |
| Receivables Days (2 points) | 1. To discover the time taken for its receivables to pay their debts to the business. 2. To assess whether individual receivables are possibly going to become bad debts. |
| Payables Days (2 points) | 1. To discover the time taken for the business to pay its debts to its payables. 2. To assess whether the business is in danger of defaulting on the debts it owes. |
| Dividends per share | To calculate the direct financial reward that a shareholder will receive from the company every 6 months, in return for owning its shares. |
| Dividend Yield (%) | To assess the percentage return that a shareholder receives from a share, based on the assumption that the shareholder is considering purchasing shares at the current market price. This return can be compared to current interest rates for savings in a bank. |
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