Formulae for Financial Ratios

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GCE Business Studies
BUSS3 Strategies for Success
• Formulae for Financial Ratios
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Teacher Resource Bank / GCE Business Studies / BUSS3 / Version 1.1
Formulae for Financial Ratios: BUSS3
Financial ratio
Formula
Current ratio
current assets : current liabilities
Acid test ratio
liquid assets : current liabilities
Where liquid assets are current assets – inventories (stock).
Return on capital employed %
(ROCE)
operating profit
total equity + non-current liabilities**
x 100
** Where this equals capital employed.
revenue
Asset turnover
net assets
cost of sales
average inventories (stock) held
Inventory (stock) turnover
Payables (Creditors) days
payables*
cost of sales
(Payables’* collection period)
x 365
* Payables = creditors throughout this formula.
Receivables (Debtors) days
(Receivables’* collection period)
Gearing
receivables*
revenue
x 365
* Receivables = debtors throughout this formula.
non-current liabilities
total equity + non-current liabilities**
x 100
** Where this equals capital employed.
Dividend per share (in pence)
total dividends
number of issued ordinary shares
Dividend yield (%)
ordinary share dividend (in pence)
current market price (in pence)
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