Financial Ratios and Profitability Metrics

Flashcards covering key financial ratios and profitability metrics.

Gross Profit Margin

Measures the percentage of revenue that is gross profit

Gross profit margin

Gross profit/ revenue x 100

Net Profit Margin

Measures the percentage of revenue that is net profit

Net profit margin

Net profit/ revenue x 100

ROCE (Return on Capital Employed)

Measures how efficiently a firm uses its capital to generate profit

ROCE

Profit/ capital employed x 100

Return on Equity

Measures how efficiently shareholder investment generates a profit

Return on equity

Profit/ shareholder equity x 100

Debtor Days

Measures how many days it takes for a company to collect payment from its customers

Debtor days

Debtors/ revenue x 365

Creditor Days

Measures amount of days it takes you to pay your suppliers

Creditor days

Creditor/ cost of sales x 365

Asset Turnover

Measures how efficiently a firm generates revenue from its assets

Asset turnover

Revenue/ non current assets

Stock Turnover

Measures how many times a business replenishes its stock on a yearly basis

Stock turnover

cost of sales/ stock

Gearing Ratio

Measures the proportion of a firm's assets that are financed by long-term borrowing

Gearing ratio

Non current liabilities / capital employed x100

Current Ratio

Measures a company's ability to pay its current liabilities with its current assets

Current ratio

Current assets / current liabilities

Acid Test Ratio

Measures a firm's ability to pay off its current liabilities without relying on inventory

Acid test ratio

Current assets - stock / current liabilities

Dividend per Share

Measures the amount of dividend a shareholder receives for each share owned

Dividend per share

Total dividend / number of shares

Dividend Yield

Measures how much a shareholder receives back compared to the price of the share as a percentage

Dividend yield

Dividend per share / current market price x 100

Earnings per Share (EPS)

Measures the profit attributable to each share

Earnings per share

Profit for year / number of ordinary shares

Price Earnings Ratio (P/E)

Measures how much investors are willing to pay for each pound of earnings

Price earnings ratio

Market price of share / earnings per share