What are the three profitability ratios?

Gross profit %, net profit % and ROI

if the acid test is less than 1:1 what does this mean for the business?

They will have trouble paying their bills

What is the formula for the current ratio?

Current assets - current liabilities

What is the formula for the acid test?

Current assets - closing stock / current liabilities

How do we calculate capital employed?

share capital + reserves +long term loans

What does it mean when a company is highly geared

they might have trouble paying back loans, they have borrowed more money

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LC Ratios

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Questions 17

Answers

1
What are the three profitability ratios?
Current ratio, acid test ratio and ROI
Gross profit %, net profit % and ROI
Gross profit %, net profit % and Debt equity
ROI, Capital employed and Debt equity
2
What are the TWO liquidity ratios?
gross profit %, net profit % and Debt equity
Current ratio, acid test ratio
ROI, Capital employed and Debt equity
Gross profit %, net profit % and ROI
3
How do we express the profitability ratio answers?
€
%
x:1
not applicable
4
BUSINESS IS THE BEST SUBJECT!!!!!
100%
NAH
HELL YESS
YESSSS
5
How do we calculate ROI?
Net profit - expenses
gross profit / capital employed
Net profit + capital employed
Net profit / Capital employed
6
how do we calculate gross profit?
sales - net profit
sales - expenses
Sales - cost of sales
capital employed - retained earnings
7
if the acid test is less than 1:1 what does this mean for the business?
They have too much cash
they wont have any trouble paying their bills
They will have trouble paying their bills
it doesn't matter
8
The ideal ratio for the acid test ratio is 1:1
False
True
9
What is the formula for the current ratio?
Current assets - current liabilities
Current assets - closing stock / current liabilities
10
What is the formula for the acid test?
Current assets - current liabilities
Current assets - closing stock / current liabilities
11
How do we calculate capital employed?
debt / equity
Net profit - expenses
none of the above
share capital + reserves +long term loans
12
What does it mean when a company is highly geared
they have a lot of investment from shareholders
they might have trouble paying back loans
they have borrowed more money
they have too much cash
13
Which of the following are NOT expenses?
PROIFT
LIGHT AND HEAT
WAGES
INSURANCE
14
Working capital ratio is also known as the current ratio
False
True
15
There is no ideal for the debt/equity ratio
True
False
16
how do we calculate net profit?
gross profit - expenses
capital employed - retained earnings
Sales - cost of sales
sales - net profit
17
In business terms, what does ROI stand for
return on income
Republic of Ireland
Republic of Ivory coast
Return on Investment

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