acc evaluation ratios

Gross Profit Margin

Gross Profit/Sales x 100

analyses adequacy of mark-up

profitability

Net Profit Margin

Net Profit/Sales x 100

analyses adequacy of expense control

profitability

Expense Ratios (wages)

Wages/Sales x 100

examines the % of sales each expense consumes

profitability

Return on Owner’s Investment

Net Profit/Owner’s Equity x 100

how much net profit is generated through owner’s investment

profitability

Return on Total Assets

Net Profit/Total Assets x 100

management’s ability to generate net profit from total assets

profitability

Working Capital Ratio

Current Assets/Current Liabilities x 100

amount of current assets to cover current liabilities (quantity)

liquidity

Quick Assets Ratio

Current Assets less Inventory & Prepayments/Current Liabilities less Bank Overdraft x 100

Bank & Accounts Receivable/Accounts Payable & Accruals x 100

our immediate liquidity in the next 30 days (quantity of what can be easily converted to cash)

liquidity

Cash Flow Cover

Net Op Cash Flows (12 month)/Average Current Liabilities (1 month)

number of times we can cover our current liabilities (not a %)

liquidity

Operating Cash Cycle

ITO + ARTO

average length of time taken to sell all inventory then turn accounts receivable from credit sales into cash

efficiency

Debt Ratio

Total Liabilities/Total Assets