It shows the profit made from the buying and selling of stock
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What is the Gross Profit Percentage formula?
Gross Profit ÷ Sales x 100
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Describe Return on Capital Employed
Calculates how much money an investor will get back after a period of time
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What is the return on capital employed formula?
Net Profit ÷ Capital at start x 100
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Describe Net Profit Percentage
Shows the profit made once expenses have been paid by the organisation
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What is the net profit percentage formula?
Net profit ÷ Sales x 100
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Describe Current ratio (Working capital ratio)
Shows how able an organisation is to pay off its short-term debts
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What are advantages of ratio analysis?
Ratios help: compare current performance with previous records, compare a firm’s performance with similar competitors, monitor and identify issues that can be highlighted and resolved
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What are limitations of ratio analysis?
Ratio analysis information is historic – it is not current, ratio analysis does not take into account external factors such as a worldwide recession, ratio analysis does not measure the human element of a firm
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