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Quick Ratio (L)

A higher quick ratio (current asset - prepayments - inventory/ liability) shows that business are capable of covering its short term liability; reduced reliance on inventory to meet obligations

Receivable turnover (L)

An increase in receivables turnover (365 days/ receivable turnover) means the company is collecting cash from customers more frequently throughout the year, which is positive for cash flow and reduces the risk of bad debts.

Inventory turnover (L)

A higher inventory turnover (cost of sales /average nventory ) indicates the business is selling and replacing inventory more rapidly, which is a sign of strong sales or efficient inventory management.

Inventory turnover.. average days in inventory. (L)

Lower average days in inventory means inventory (365 days/inventory turnover) is sold more quickly, which is usually preferable (may be due to a drop in selling price)

Debt ratio (S)

The higher the ratio (total liabilities/total assets) , the greater the financial risk that the entity may not be able to meet its maturing obligations

Interest coverage ratio (S)

The higher the coverage (EBIT/Interest expense) , the more lenient creditors will be in lending money.

• Higher coverage may be due to low debt ratio

Return on Equity (P)

The higher the return on equity, the more profit earned for each dollar invested (Profit available / Average ordinary shareholder equity)

• May be due to higher net income

Return on Assets (P)

A high Return on Assets (ROA) indicates that a company is efficiently using its assets to generate profit. (Profit after tax/ average total assets)

Profit margin (P)

The higher the profit margin, the more money the business earns which results in profit (Profit after tax/Net sales)

Gross profit margin (P)

The higher the profit margin, the more money the business earns in sales which results in gross profit (Gross profit/Net sales)

Quick Ratio (L)

A higher quick ratio (current asset - prepayments - inventory/ liability) shows that business are capable of covering its short term liability; reduced reliance on inventory to meet obligations

Asset Turnover

The higher the asset turnover, the more efficient asset is used to generate income. (Net sales/ Average total asset). Can happen from increased sales or decreased assets.