BUSS3 Formula...


Mind Map on BUSS3 Formula..., created by loz95 on 02/23/2014.
Mind Map by loz95, updated more than 1 year ago
Created by loz95 about 9 years ago

Resource summary

BUSS3 Formula...
  1. Current Ratio
    1. Liquidity ratio
      1. A current ratio between 2 and 3 is ideal
        1. Less than 2 may have liquidity problems more than 2 means has too much money in current assets - opportunity cost.
          1. Current Assets / Current liabilities
          2. ACID test
            1. Liquidity ratio
              1. Is a tougher test to see business ability to pay bills.
                1. Depends on business a figure less than one would highlight serious problem
                  1. (Current Assets - Stock)/ Current liabilities
                  2. Gross Profit Margin
                    1. Profitability Ratio
                      1. Higher the figure the better!
                        1. Only shows profit before overhead costs have been taken.
                          1. (Gross Profit/Sales Revenue) X 100
                          2. Operating Profit Margin
                            1. Profitability Ratio
                              1. (Operating Profit/ Sales Revenue) X 100
                                1. Highest possible % is preffered here.
                                  1. If the % is decreasing the expenses for firm have increased.
                                  2. ROCE


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