Accounting - Financial Indicators 😭

Gross Profit Margin 🟥

Gross Profit/Net Sales x 100

Net Profit Margin 🟥

Net Profit/Net Sales x 100

Return on Assets 🟥

Net Profit/Average Total assets x 100

Return on Owners Investment 🟥

Net Profit/Average Capital x 100

Asset Turnover 🟩

Net Sales/Average Total Assets

Inventory Turnover 🟩

Average Inventory/COGS x 365

Accounts Receivable Turnover 🟩

Average Accounts Receivable/Net Credit Sales (plus GST) x 365

Accounts Payable Turnover 🟩

Average Accounts Payable/Net Credit Purchases (plus GST) x 365

Working Capital Ratio 🟦

Current Assets/Current Liabilities

Quick Assets Ratio 🟦

Current Assets - (Inventory & Prepaid expenses)/Current Liabilities

Cash Flow Cover 🟦

Net Cash flows from operating activities/Average Current Liabilities

Debt Ratio 🟪

Total Liabilities/Total Assets x 100

What does GPM measure?

Enough Mark-up?

What does ROA measure?

How effectively business used its assets to earn profit

What does ROI measure?

How effectively business has used owners fund to earn profit

What does ATO measure?

How effectively Assets have been used to generate revenue

What does Inventory Turnover measure?

Average number of days it takes to turn inventory into sales

What does ARTO measure?

Average time taken by accounts Receivable

What does APTO measure?

Average number of days it takes to settle with suppliers

What does WCR measure?

Liquidity of a business

What does Debt Ratio measure?

Percentage of how much business relies on external finances