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Ratio Analysis Profitability

The document discusses various financial ratios used to analyze a company's profitability, efficiency, liquidity, and financial leverage. It defines ratios like return on ordinary shareholders' funds, return on capital employed, net profit margin, gross profit margin, average stock turnover period, average settlement period for debtors and creditors, sales to capital employed, sales per employee, current ratio, acid test ratio, operating cash flows to maturing obligations, gearing ratio, and interest cover ratio. These ratios provide important metrics for evaluating a company's financial performance and health.

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jinharzahidi
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30 views

Ratio Analysis Profitability

The document discusses various financial ratios used to analyze a company's profitability, efficiency, liquidity, and financial leverage. It defines ratios like return on ordinary shareholders' funds, return on capital employed, net profit margin, gross profit margin, average stock turnover period, average settlement period for debtors and creditors, sales to capital employed, sales per employee, current ratio, acid test ratio, operating cash flows to maturing obligations, gearing ratio, and interest cover ratio. These ratios provide important metrics for evaluating a company's financial performance and health.

Uploaded by

jinharzahidi
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Ratio Analysis

Profitability
Net profit after taxation and preference dividend (if any) x 100
Return on ordinary shareholders’ funds: Ordinary share capital + Reserves
Net profit before interest and taxation x 100 Share
Return on capital employed
capital + Reserves + Long-term loans
Net profit margin Net profit before interest and taxation x 100
Sales
Gross profit margin Gross profit x 100
Sales
Efficiency
Average stock held x 365
Average stock turnover period Cost of sales
Trade debtors x 365
Average settlement period for debtors Credit sales
Average settlement period for creditors
Trade creditors x 365
Credit purchases
_______ Sales__________
Sales to capital employed Long-term capital employed
Sales per employee _______Sales_______
Number of employees

Liquidity Ratios
Current ratio Current assets_______________
Current liabilities (creditors due within one
year)

Current assets (excluding stock) Current


Acid test ratio liabilities

Operating cash flows to Operating cash flows


maturing obligations Current liabilities

Long-term liabilities _______


Gearing ratio Share capital + Reserves + Long-term liabilities

Profit before interest and taxation_


Interest cover ratio
Interest payable

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