Accounting Ratios

Front

What are the two categories of ratios?

Back

1. Profitability Ratios 2. Liquidity Ratios

Front

What do profitability ratios measure?

Back

Profitability ratios measure how profitable the business is.

Front

What is the equation for Sales?

Back

Sales = Cost + Profit

Front

What is the equation for Cost?

Back

Cost = Sales - Profit

Front

What is the equation for Profit?

Back

Profit = Sales - Cost

Front

What does Mark-Up measure?

Back

Mark-Up looks at the relationship between Gross Profit and Cost.

Front

How is Mark-Up calculated?

Back

Mark-Up = (Profit / Cost) X 100

Front

If Cost is $60,000 and Profit is $20,000, what is the Mark-Up?

Back

Mark-Up = ($20,000 / $60,000) X 100 = 33 1/3 %.

Front

If Cost is $80,000 and Mark-Up is 25%, what is the Profit?

Back

Profit = 1/4 X $80,000 = $20,000.

Front

What does Margin measure?

Back

Margin looks at the relationship between Gross Profit and Sales.