Aqa A Level Business Studies - What Ratios You Should Know?

Profitability ratios

Gross Profit Margin = Gross profit x 100

Sales revenue

GPM shows the profit as a percentage of the total sales revenue generated by a company. You can compared the profits of businesses of various sizes because the results is expressed as a % rather than a number. Though it can be difficult to compare GPM of companies in different sectors

Efficiency ratio

ROCE = Net profit before interest and tax x 100

Capital employed

ROCE measures both the efficiency and profitability of a company`s invested capital. It assesses the return a company is making from its capital employed. Capital employed = long-term liabilities + share capital + retained profit.

Liquidity ratio

Acid test ratio = current assets - stock

current liabilities

Acid test ratio is a good indicator of how well a company is able to meet its short-term obligations. This is because it removes stock as part of the current assets stocks are more difficult to turn into liquidity.

Also:

Payable days

Receivable days

Operating Profit margin

Tax profit rate

Inventory turnover

Exchange rate margin

Dividend yield