Ratio (Finance)Ratio (Finance)

PresentationPresentation

By … Rose 11BFBy … Rose 11BF

Gross Profit RatioGross Profit Ratio

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

Formula for Gross profit Formula for Gross profit ratioratio

Gross Profit Ratio = (Gross profit/sales)×100

Example :Gross profit=24,000Sales=35,000

Calculation = (24,000/35,000)x100 = 68.57%

Net Profit RatioNet Profit Ratio

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

Formula for Net profit ratioFormula for Net profit ratioNet profit ratio = (Net

profit/Sales)x100

Example : Net profit = 12,225Sales = 35,000

Calculation = (12,225/35,000)x100 = 34.93%

Current RatioCurrent 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 RatioFormula for Current RatioCurrent ratio = Current assets/Current

liabilities

Example : Current assets = 235,000 Current liabilities =

80,000Calculation = 235,000/80,000

= 2.9

The Acid Test RatioThe 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 Formula for The Acid Teat RatioRatio

The acid test ratio = (current assets-Stock)/current liabilities

Example : current assets = 235,000 stock = 140,000 current liabilities = 80,000

Calculate = (235,000-140,000)/80,000

= 1.19

Return On Capital EmployedReturn On Capital EmployedReturn On Capital Employed or

ROCE use to see how much money that the business get back from investigating.

Formula for ROCEFormula for ROCEROCE ratio = (Operating profit/Capital

employed)x100

Example : operating profit = 14,725 capital employed =

555,000Calculation = (14,725/555,000)x100

= 2.65%