Ratios

Gross Profit Margin

Gross profit / Revenue x 100

Increase might indicate overstatement of revenue or understatement of CoS

Operating Profit Margin

Operating Profit / Revenue x 100

Increase might = overstatement revenue or understatement expenses

ROCE

Return on capital employed =

Operating Profit / (Equity + NC Liability) x 100

Increase might = overstated Profit or understatement NC Liabilities

Current Ratio

Current Assets / Current Liabilities

Decrease might = cash flow problems which could impact going concern and require disclosure or affect the basis of preparation

Quick Ratio

(Current Assets - Inventories)

/ Current Liabilities

Decrease might = cash flow problems which could impact going concern and require disclosure or affect the basis of preparation

Gearing

Debt / (Debt + Equity)

Increase might = too much reliance on Debt which could impact the going concern and require disclosure or affect the basis of preparation

Interest Cover

Operating Profit / Interest Expense

Decrease might = going concern uncertainties which require disclosure or mau affect basis of preparation

Trade receivable collection period

Trade receivable / Revenue x 365

Increase might = overstatement receivable

Inventory holding period

Inventory / CoS x 365

Increase might = overstatement inventory

Trade payable payment period

Trade payable / purchases x 365

Increase might = cash flow problems affecting going concern which may require disclosure

Asset Turnover

Revenue / Total Assets

Increase might = overstatement of revenue or understatement assets