573294
BUSS3
Formula...
- 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
- Liquidity ratio
- 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
- Liquidity ratio
- 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
- Profitability Ratio
- 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.
- Profitability Ratio
- ROCE
Annotations:
- 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
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