Intro to Ratios

Front

What is an accounting ratio?

Back

An accounting ratio compares two line items in a company's financial statements.

Front

Why are accounting ratios important?

Back

They are a crucial tool for analyzing financial statements.

Front

Where can accounting ratios be found?

Back

In the income statement, balance sheet, and cash flow statement.

Front

What is a mark-up?

Back

A mark-up is the cost of a good plus the profit a company wants to make.

Front

How is mark-up calculated?

Back

Mark-up = (Gross profit / Cost price) * 100.

Front

If the cost price is $4 and the gross profit is $1, what is the selling price?

Back

Selling price = Cost price + Gross Profit = $4 + $1 = $5.

Front

What is the mark-up percentage if the cost price is $4 and the gross profit is $1?

Back

Mark Up (%) = (1/4) * 100 = 25%.

Front

What is a profit margin?

Back

A profit margin is the gross profit shown as a fraction or percentage of the selling price.

Front

How is profit margin calculated?

Back

Margin = (Gross profit / Selling Price) * 100.

Front

If the cost price is $4 and the gross profit is $1, what is the profit margin percentage?

Back

Margin (%) = (1/5) * 100 = 20%.