Edit · Business ratios

gross profit margin

percentage of revenue left after paying COGS

profit margin

percentage of revenue left after expesnses

Return on capital employed (ROCE)

how effectively the business uses its long-term capital to generate operating profit

Capital employed

non-current liabilities + owner's equity (the total value of all long-term finance invested in the business)

Current ratio

ideal range: 1.5-2.0, whether current assets can cover current liabilities

Quick ratio (acid test)

at least 1:1, whether current liabilities can be covered without relying on selling inventory

stock turnover

number of times an organization sells its stocks within a time period

debtor days

number of days it takes a business to collect money from its debtors

creditor days

number of days on average for a business to pay its trade creditors

gearing ratio

assesses an organization's long-term liquidity position (ideally less than 50% of finances comes from loans)