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Summary Accounting Ratios Cheat Sheet

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Accounting Ratios Cheat Sheet

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  • November 6, 2015
  • 3
  • 2014/2015
  • Summary
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By: Patrick95 • 8 year ago

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Geets
Profitability Ratios:

Operating Profit
↑ Return on capital employed (ROCE)
¿ × 100
Share Capital+ Reserves+ NonCurrent liabilities

Profit before preference dividends
↑ Return on shareholders’ funds (ROE)
¿ ×100
Share Capital+ Reserves

Gross Profit
↑ Gross Profit Margin
¿ ×100
Sales Revenue

Operating Profit
↑ Operating Profit margin
¿ ×100
Sales Revenue

Profit
Rate of return on investment
¿
Invested Capital



Efficiency Ratios:

Average Inventories held
↓ Average inventory holding period
¿ ×365
Cost of sales

Cost of sales
↑ Or Inventory turnover
¿
Inventory held

Average trade receivables
↓ Average settlement period for trade receivables
¿ ×365
Credit Sales Revenue

Credit sales revenue
↑ Or Trade receivables turnover
¿
Trade receivabes

Average trade payables
↑ Average settlement period for trade payables
¿ ×365
Credit purchases

Credit purchases
↓ Or Trade payables turnover
¿
Trade payables

Sales
↑ Asset turnover ratio
¿
Share Capital+ Reserves+ Non Current liabilities

Sales
↑ Sales revenue per employee
¿
Number of employees

, Average Average Average
inventory
holding
period
+ settlement
period for
receivables
- payment
period for
payables
=Operating
cash cycle




Operating Asset
profit
margin x turnover
ratio = ROCE




Liquidity ratios: Use financial ratios to assess liquidity and solvency

Current assets
↑ Current ratio
¿
Current liabilities

Current assets−Inventory
↑ Acid test ratio
¿
Current liabilities

Operating cash flows
↑ Cash ratio
¿
Current liabilities




Financial gearing occurs when a business is financed
externally. To finance growth and exploit tax
advantages (interest is tax deductible). Dangers of high
financial gearing: Less control over financing decisions.
Limited flexibility due to loan agreement restrictions.
Risk of bankruptcy.

Non−current liabilities
Gearing ratio/Debt to capital
¿
Share capital+ reserves+ longterm liabilities

Operating profit
↑ Interest cover ratio
¿
Interest payable



Investment Ratios:

Dividend announced for the year
↑ Dividend pay-out ratio
¿ ×100
Profit before preference dividend

Dividend per share /1−Dividend tax rate
↑ Dividend yield ratio
¿ ×100
Market value per share

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