Additional question 26 answer
Here are many of the ratios to choose from when answering this question and a basic meaning, or brief description, of each group of ratios.
| Ratio Name | Basic Meaning |
| Profitability | |
|---|---|
| Gross Profit Margin | Profitability ratios are all percentages and they tell us how much profit we have made per £1 of turnover. There are many different profitability ratios and here are just a few of them. |
| Operating Profit Margin | |
| Profit Before Interest and Taxation Margin | |
| Retained Profit Margin | |
| Rate of Return Ratios | |
| Return on Capital Employed | Rates of return ratios show us how profitability of a business relates to the capital and assets employed, or used, by the business. |
| Return on Total Assets | |
| Liquidity | |
| Current Ratio | Liquidity ratios give us an idea of how well the business is able to pay all of its bills over the short term |
| Acid Test Ratio | |
| Activity | |
| Total Asset Turnover Ratio | When we ask a businessman how well he has used the assets in his business, these are the ratios he would calculate in order to answer our question. There are many of these ratios and each one tells us a little bit about the business's efficiency in using its assets |
| Fixed Asset Turnover Ratio | |
| Stock Turnover Ratio | |
| Debtors Turnover Ratio | |
| Creditors Turnover Ratio | |
| Gearing | |
| Debt: Equity | The gearing ratios tell us whether the shareholders are really in control of their own business or whether then banks or debenture holders might be. |
| Debt: Debt + Equity | |
Back to Additional question 26.
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