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Ratio analysis (Business finance)
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Key terms - Business finance
Terms in this set (9)
Gross profit margin
This ratio looks at gross profit as a percentage of sales turnover.
Mark-up
This ratio calculates gross profit as a percentage of the cost of sales.
Net profit margin
This ratio shows the net profit as a percentage of sales.
Return on capital employed (ROCE)
This ratio shows the percentage return a business is achieving from the capital invested to generate the return.
Current ratio
This ratio shows a business the amount of current assets it owns in relation the amount of current liabilities it owes.
Liquid capital ratio
This ratio gives a more accurate reflection of the true liquidity of a business as it removes the least liquid of all current assets from the equation i.e. inventories.
Trade receivable
This ratio measures, on average, how long it takes for debtors to pay and is expressed as a number days of days.
Trade payable
This ratio shows, on average, how long it takes a firm to pay for goods and services bought on credit days and is expressed as a number of days.
Inventory turnover
This ratio shows the average amount of time an item of stock is held by a business and is expressed as a number of days.
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