Ratio (Finance) Presentation By … Rose 11BF

Gross Profit Ratio Gross profit ratio use to see how much does the business get profit of a year.

Formula for Gross profit ratio Gross Profit Ratio = (Gross profit/sales)×100 Example :Gross profit=24,000 Sales=35,000 Calculation = (24,000/35,000)x100 = 68.57%

Net Profit Ratio The profit that business get – the expenses of the business and tax.

Formula for Net profit ratio Net profit ratio = (Net profit/Sales)x100 Example : Net profit = 12,225 Sales = 35,000 Calculation = (12,225/35,000)x100 = 34.93%

Current Ratio Current ratio use to see if the business can pay the all debts straight way or not. If the answer is between 1.5 – 2.0 that’s mean the business has enough money to pay all the debts, If the answer is more it’s mean that the business has too much money.

Formula for Current Ratio Current ratio = Current assets/Current liabilities Example : Current assets = 235,000 Current liabilities = 80,000 Calculation = 235,000/80,000 = 2.9

The Acid Test Ratio The acid test ratio is the same as current ratio but we have to take away the stocks because the stocks is ILLIQUID

Formula for The Acid Teat Ratio The acid test ratio = (current assets- Stock)/current liabilities Example : current assets = 235,000 stock = 140,000 current liabilities = 80,000 Calculate = (235, ,000)/80,000 = 1.19

Return On Capital Employed Return On Capital Employed or ROCE use to see how much money that the business get back from investigating.

Formula for ROCE ROCE ratio = (Operating profit/Capital employed)x100 Example : operating profit = 14,725 capital employed = 555,000 Calculation = (14,725/555,000)x100 = 2.65%