75% exam

Capital Employed represents the total amount of funds invested in a business by its owners and creditors. It measures the resources available for generating profits.

The Current Ratio measures a company's ability to meet its short-term financial obligations using its current assets.

The Debt-to-Equity Ratio indicates the proportion of a company's financing that comes from debt compared to equity.

The Gross Profit Margin measures the profitability of a company's core operations before considering expenses beyond the direct cost of goods sold.

The Inventory Turnover Ratio measures how efficiently a company manages its inventory by calculating how many times its inventory is sold and replaced during a period.

Similar to the Current Ratio, but excludes inventory, showcasing a company's ability to pay short-term debts with its most liquid assets.

Measures a company's ability to cover its short-term debts with its readily available cash.

They reveal a company's liquidity, or its ability to meet short-term financial obligations. A higher ratio generally signifies greater liquidity and financial health, while a lower ratio may indicate a risk of difficulty in covering short-term debts.

Indicates a company relies heavily on debt financing, potentially increasing risk but also offering higher returns.

Suggests a company is primarily funded by equity, making it less risky but potentially limiting growth.

Indicates the proportion of a company's assets financed by debt. It shows how much of the company's resources are financed by borrowing.

Comparing a company's Debt-to-Equity and Debt-to-Assets ratios can reveal further insights into its financial structure and risk profile.

The profit a company makes after deducting the direct costs of producing or acquiring the goods it sells. It represents the company's profit from core operations before considering other expenses.

The direct costs involved in producing or acquiring the goods a company sells. It includes the cost of raw materials, labor, and manufacturing overhead.

Subtract the Cost of Goods Sold (COGS) from the Revenue. This tells you how much profit the company made before considering other expenses.

Indicates a company is efficient at managing its production or acquisition costs, meaning a larger portion of revenue is left over as profit after covering those direct costs.

The average value of a company's inventory over a period. Calculated by adding opening inventory to closing inventory and dividing by 2.

Measures how quickly a company collects payments from its customers. Calculated by dividing revenue by the average receivables.

Measures how quickly a company pays its suppliers. Calculated by dividing purchases by the average payables.

Miden el tiempo que tarda una empresa en pagar a sus proveedores. Se calculan dividiendo el total de los pagos pendientes a un año por las compras.

Miden el tiempo que tarda una empresa en cobrar a sus clientes. Se calculan dividiendo las cuentas por cobrar entre los ingresos.

Un número alto de días de inventario indica una gestión de inventario ineficiente, mientras que un número bajo sugiere que la empresa maneja eficientemente su inventario.

Un número alto de días de cobranza indica que la empresa tarda en cobrar a sus clientes, lo que puede afectar su flujo de caja. Un número bajo significa que la empresa cobra rápidamente.

These are resources a company owns that can be converted into cash within a year. They are the company's short-term assets.

These are debts a company owes to others and are due within a year. They represent short-term financial obligations.

The value of goods a company still has on hand at the end of a period. It's a component of current assets.

Money owed to a company by its customers for goods or services already delivered.

Money a company owes to its suppliers for goods or services already received.

A profitability ratio that measures how effectively a company uses its shareholder's capital to generate profits. It assesses the return on investment for shareholders.

This ratio calculates the percentage of profit generated by the company before considering interest and taxes, compared to the total capital invested by shareholders. The idea is to see how effectively the company is deploying its resources and generating returns for their investors.

This ratio is important because it reveals how well a company is generating profits from its core operations. It helps investors understand the profitability of a company and how efficiently it's using its capital. It also helps assess a firm's financial health.

Total Shareholders' Funds represent the total amount of money invested in the business by shareholders.

Issued Share Capital represents the total value of shares a company has sold to its shareholders. Share premium represents the amount received in excess of the par value of a share. Reserves signify the accumulated profits that have not been distributed to shareholders.

Return on Total Capital Employed (ROCE) measures how efficiently a company uses all its capital, both from owners and lenders, to generate profits. It shows the return on investment for all stakeholders.

ROCE is calculated by dividing the net profit before interest and taxes by the total capital employed, then multiplying by 100 to express it as a percentage.

Total capital employed represents the total amount of funds invested in a business by its owners and creditors. It includes shareholder's equity and long-term debt.

A high ROCE indicates that a company is effectively using its capital to generate profits. It suggests that the company is managing its finances well and is potentially a good investment.

A low ROCE might suggest that a company is not using its resources effectively, potentially indicating inefficiencies in its operations or a need for improved financial management.

Measures a company's profitability after considering all operating expenses, but before accounting for interest payments and taxes.

Shows how efficiently a company uses its total capital (both from owners and lenders) to generate profits.

The total amount of funds invested in a business by its owners and creditors.

The relationship between a specific expense or profit and total sales revenue, usually expressed as a percentage.

This is the money invested in the business by shareholders, including issued share capital and reserves.

It's essential to consider the accounting methods used for calculating capital employed when comparing different companies.

Gearing percentage measures the proportion of a company's financing that comes from debt (long-term liabilities) relative to its total capital employed. It assesses a company's financial risk and its reliance on borrowing.

A high gearing percentage typically suggests a company relies heavily on debt financing. While this can potentially lead to higher returns, it also exposes the company to greater financial risk, as it might face difficulty repaying its debts.

A low gearing percentage indicates a company is primarily funded by equity (shareholders' capital). This generally implies less financial risk as the company relies less on borrowing but may limit its growth potential, as it might have less capital to invest for expansion.

Gearing percentages can vary significantly between companies within the same sector due to factors such as industry trends, company strategies, access to capital, and historical financial performance. Some industries might naturally have higher debt levels than others.

Analyzing a company's gearing percentage alongside other financial ratios provides a more comprehensive view of its financial health. It helps assess whether its debt levels are sustainable and how much risk it assumes to generate profits.

The interest cover ratio measures a company's ability to meet its interest obligations, indicating its financial health. A higher ratio generally suggests a stronger financial position.

Profit Before Interest & Tax (PBIT) represents the company's profit before factoring in the interest expense and taxes, serving as a base for calculating the interest cover ratio.

Interest Payable represents the amount of interest a company owes to lenders. It's a key component in calculating the interest cover ratio.

A higher interest cover ratio indicates that a company can easily cover its interest expenses with its current earnings, suggesting good financial health.

A low interest cover ratio signals that a company struggles to meet its interest obligations, potentially posing a risk to its financial stability.