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MDCL - Ratios 2

The meaning of the ratio

QuestionAnswer
Gross Profit percentage Gross profit as a % of revenue
Operating Profit percentage Profit from operations as a % of revenue
Expense / revenue percentage Expenses as a % of revenue
Return on Capital Employed Profit as a % of capital employed in a business
Return on total assets Profit as a % of total assets in a business
Return on equity Profit as a % of the ordinary shareholders investment
Earnings per share Measures the amount of profit / loss earned by each ordinary share, after tax
Return on net assets Measures the profit before interest and tax that arises from operations and is usually shown in the operating statement
Current ratio (Working capital ratio) Shows the extent to which current assets cover current liabilities
Quick / acid test ratio Shows the extent to which current assets which can be quickly converted in to cash cover liabilities
Interest cover Shows how many times the company could pay interest costs out of operating profit
Gearing Debt as a % of capital employed
Inventory turnover The number of times a year that the inventory is turned over
Inventory holding period The number of days inventory is held on average
Trade receivables collection period Average number of days taken to collect debts
Trade payables payment period Average number of days taken to pay suppliers
Working capital cycle Measures the period of time between payment for inventory and the collection of cash from customers
Asset turnover (net assets) Measures the efficiency with which a business uses its assets to generate revenue
Created by: ChrisMorgan