Ratios

Gross profit is calculated by...

• Revenue - cost of sales

• Revenue + cost of sales

• Revenue - expenses

• Revenue + expenses

Net profit is calculated by...

• Revenue / fixed costs

• Revenue - cost of sales

• Gross profit - expenses

• Gross profit + fixed costs

Liquidity measures...

• Whether the business has enough cash to pay their bills

• Whether the business will make a profit

• Whether the business will survive

• Whether people should invest in the business

Gross profit margin is calculated by...

• Gross profit / Revenue

• (Gross profit / Revenue) x 100

• (Gross profit + Revenue) x 100

• Gross Profit - 100

Net profit margin is calculated by...

• (Net profit / Revenue) x 100

• Net profit + Revenue

• Net profit / Revenue

• (Expenses - Revenue) x 100

Current ratio is calculated by...

• Current assets + Current liabilities

• Current assets / Current liabilities

• (Current assets - Stock) / Current liabilities

• ((Current assets - Stock) / Current liabilities) x 100

The ideal result for the current ratio is...

• Exactly 1 : 1

• Exactly 1.5 : 1

• Between 1 and 5 : 1

• Between 1.5 and 2 :1

Liquid capital ratio is calculated by...

• (Current assets - stock) / current liabilities

• Current assets / current liabilities

• (Current assets - cash) / current liabilities

• (Current assets - stock) / current liabilities x 100

The ideal result for the liquid capital ratio is...

• Between 1.5 and 2 :1

• 1 : 1

• 3 : 1

• 0.5 : 1

To improve their gross profit a business could...

• Raise prices

• Find a cheaper supplier of materials

• Reduce advertising

• Pay less overtime to workers