WorksheetsFinancial Ratio Analysis
Total questions: 25
Worksheet time: 18mins
The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:
Balance Sheet
Statement of Retained Earnings
Statement of Cash Flows
Statement of Profit or Loss
How do you calculate Gross Profit?
Sales - COGS
Sales - NP
COGS - Expenses
COGS - NP
The Statement of Profit or Loss can be expressed as an equation:
Income =Income-Expenses
Revenue-Expenses = Net Profit/Loss
Revenue + Expenses = Net Profit/Loss
Expenses = Net Income + Revenue
This document communicates what the entity owns in terms of assets, what it owes in the terms of liabilities, and the difference between those two which represents what the owners o the company are entitled to.
Income Statement
Statement of Financial Position
Statement of Cash Flows
Balance Statement
Assets = Liabilities + Equity
Statement of Financial Position
Income Statement
What a company owes to creditors:
Assets
Liabilitites
Equity
The gross profit ratio is calculated by dividing:
Profit by sales
Profit by shareholders’ equity
Gross profit by sales
Sales by cost of sales
What is the formula for Gross Profit ratio
Profit / Net sales revenue X 100
Gross profit / Net sales revenue X 100
Gross profit / Sales revenue X 100
Profit / Cost of sales X 100
Inventory turnover ratio evaluates:
A company’s ability to move inventory
A company’s inventory purchasing efficiency
A company’s ability to fully utilise the assets to generate income/sales.
A company’s measures how many days, on average, it takes to sell the inventory.
Indicates how quickly a firm's credit accounts are being collected and is a good measure of how efficiently a firm is managing its accounts receivable.
Rate of turnover of accounts receivable
Efficiency ratios
Working capital
Current ratio
How do you calculate the Net Profit Ratio?
Net Profit divided by Net Sales x 100
Net Sales divided by Net Profit x 100
What does the Net Profit Ratio show us?
How much money the business has spent
How much money the business owes
The percentage of profit in each sale
The percentage of assets in each account
A high NPR could indicate the following things about the business (there is more than one correct answer):
Revenues are high and the expenses have been kept low
Selling price of sock may be too low
Amount of sales is very low compared to the fixed costs (electricity, wages etc.)
Business was able to cover all costs and still make a good profit
A low NPR could indicate the following things about the business (there is more than one correct answer):
Expenses are too high compared to sales and other revenues
The business was able to cover all costs and still make a good profit
Selling price of sock may be too low
Amount of sales is very low compared to the fixed costs (electricity, wages etc.)
If you business NPR is 40% and the Industry average is 58%, does your business have a....
Favourable Net Profit Ratio
Unfavourable Net Profit Ratio
