What is capital Gearing?

Name: Capital Gearing

Formula: Non-current Liabilities /Issued share Capital + Reserves + Non-current liabilities

Explanation: Capital Gearing compares the amount of debt to a company’s capital

What is Current Ratio?

Name: Current Ratio

Formula: Current assets/Current liabilities

Explanation: This is a liquidity ratio. It measures whether a firm has enough resources to meet its short-term obligations

What is Gross Profit?

Name: Gross Profit Margin

Formula: Expenses/Revenue * 100

Explanation: This is the difference between revenue and the cost of goods

What is Liquid Capital Ratio?

Name: Liquid Capital Ratio or Acid Test Ratio

Formula: Current Assets – Inventory / Current Liabilities

Explanation: This shows the number of times the short term debt obligations are covered by liquid assets

What is Markup?

Name: Gross Profit Markup

Formula: Gross Profit / Cost of Sales * 100

Explanation: the amount added to the cost price of goods to cover overheads and profit

What is profit in relation to revenue?

Name: Profit in relation to revenue

Formula:Profit for year(before tax) / Revenue

Explanation: total amount of income generated by the sale of goods or services related to the company’s primary operations

What is Rate of Inventory Turnover?

Name: Rate of inventory turnover

Number of times

Formula: Cost of sales / (opening inventory + closing inventory/2)

Number of days

Formula: (opening inventory + closing inventory/2) / Cost of sales * 365

Explanation: The number of times inventory is sold or used in a time period such as a year.

What is return on capital employed?

Name: Return on capital employed

For sole trader

Formula: Profit before interest / Equity + non-current liabilities

For Limited Companies

Formula: Profit from operations / Equity + non-current liabilities

Explanation: compares the relative profitability of companies after taking into account the amount of capital used

What is Trade payable in days?

Name: Trade Payable Days

Formula: Trade Parables / Credit Purchases* 365

Explanation: The number of days it takes a business to settle its debts with trade suppliers.

What is Trade Receivables in days?

Name: Trade Receivable Days

Formula: Trade Receivables / Credit sales * 365

Explanation: The number of days that a customer invoice is outstanding before it is collected

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