Gross Profit Margin

The percentage of revenue remaining after deducting the cost of goods sold (COGS). Formula: $$ \text{Gross Profit Margin} = \frac{\text{Revenue} - \text{Cost of Goods Sold}}{\text{Revenue}} \times 100\% $$

*Flashcard 1*

*Front:* Gross Profit Margin

*Back:*

What it measures: The percentage of revenue remaining after deducting the cost of goods sold (COGS).

Formula:

$\text{Gross Profit Margin} = \frac{\text{Revenue} - \text{Cost of Goods Sold}}{\text{Revenue}} \times 100\%$

*Flashcard 2*

*Front:* Operating (Net) Profit Margin

*Back:*

What it measures: The percentage of revenue remaining after deducting all operating expenses, including COGS, operating expenses (like wages, rent, utilities), but before interest and taxes.

Formula:

$\text{Operating Profit Margin} = \frac{\text{Operating Income}}{\text{Revenue}} \times 100\%$

*Flashcard 3*

*Front:* EBITDA

*Back:*

What it measures: Earnings Before Interest, Taxes, Depreciation, and Amortization.

Formula:

$\text{EBITDA} = \text{Revenue} - \text{Operating Expenses (excluding Depreciation and Amortization)}$

(Note: EBITDA is often presented directly in financial statements or calculated as Net Income + Interest Expense + Taxes + Depreciation + Amortization).

*Flashcard 4*

*Front:* Return on Capital Employed (ROCE)

*Back:*

What it measures: How effectively a company is using its capital (both debt and equity) to generate profits.

Formula:

$\text{ROCE} = \frac{\text{Earnings Before Interest and Tax (EBIT)}}{\text{Capital Employed}} \times 100\%$

Capital Employed is typically calculated as Total Assets - Current Liabilities, or Shareholder's Equity + Non-current Liabilities.

*Flashcard 5*

*Front:* Asset Turnover

*Back:*

What it measures: How efficiently a company uses its assets to generate sales revenue.

Formula:

$\text{Asset Turnover} = \frac{\text{Sales Revenue}}{\text{Non-current Assets}}$

*Flashcard 6*

*Front:* Inventory Turnover

*Back:*

What it measures: The number of times a company sells and replaces its inventory over a specific period.

Formula:

$\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$

*Flashcard 7*

*Front:* Trade Receivables Days (Credit Given)

*Back:*

What it measures: The average number of days it takes for a company to collect payment from its customers.

Formula:

$\text{Trade Receivables Days} = \frac{\text{Average Trade Receivables}}{\text{Credit Sales}} \times 365 \text{ days}$

*Flashcard 8*

*Front:* Trade Payables Days (Credit Taken)

*Back:*

What it measures: The average number of days it takes for a company to pay its suppliers.

Formula:

$\text{Trade Payables Days} = \frac{\text{Average Trade Payables}}{\text{Cost of Goods Sold (or Credit Purchases)}} \times 365 \text{ days}$

*Flashcard 9*

*Front:* Current Ratio

*Back:*

What it measures: A company's ability to pay its short-term obligations (due within one year) using its short-term assets.

Formula:

$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$

*Flashcard 10*

*Front:* Quick Ratio (Acid Test)

*Back:*

What it measures: A more stringent measure of short-term liquidity, assessing a company's ability to meet its short-term debts without relying on the sale of inventory.

Formula:

$\text{Quick Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}$

*Flashcard 11*

*Front:* Gearing

*Back:*

What it measures: The proportion of a company's financing that comes from debt relative to its equity.

Formula:

$\text{Gearing Ratio} = \frac{\text{Total Debt}}{\text{Total Debt} + \text{Shareholders’ Equity}} \times 100\%$

*Flashcard 12*

*Front:* Earnings Per Share (EPS)

*Back:*

What it measures: The portion of a company's profit allocated to each outstanding share of common stock.

Formula:

$\text{EPS} = \frac{\text{Net Income} - \text{Preferred Dividends}}{\text{Weighted Average Number of Outstanding Common Shares}}$

*Flashcard 13*