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Business Performance
Analysis (Part 2)
Business Performance
Analysis (Part 2)
Profitability Ratios Calculation (1)
Profitability Ratios Calculation (1)
gross margin % = gross margin = sales - cost of sales (COS)
sales sales operating profit % = operating profit = sales - COS - other operating expenses sales
salesor profit beforeinterest and tax (PBIT) profit before tax % = profit before tax = operating profit +/- net interest (PBT) sales sales net profit % = net profit = profit before tax (PBT) - corporation taxor sales salesreturn on sales (ROS)
return on investment (ROI) = operating profit _____ (pre-tax) or return on capital employed total assets - current liabilities (ROCE) % (usually averaged) return on equity (ROE) = profit after tax__
equity
capital turnover = sales____ ________
average capital employed in year
Profitability Ratios Calculation (2)
Profitability Ratios Calculation (2)
Efficiency Ratios Efficiency Ratios
debtor days = trade debtors x 365 sales
creditor days = trade creditors x 365
cost of sales (or purchases) stock days = stock value_________ or stock average daily cost of sales in periodturnover
finished goods raw materialswork in progress average weekly average weekly raw average weekly dispatches material usage production
Efficiency Ratios Calculation (1)
Efficiency Ratios Calculation (1)
Efficiency Ratios Calculation (2)
Efficiency Ratios Calculation (2)
stock weeks = total stock value_____
average weekly cost of sales (total COS for the year divided by 52) operating cycle (days) = stock days + debtor days - creditor days
operating cycle % = working capital requirement (stocks + debtors - creditors)
sales asset turnover (times) = sales __
total assets
Liquidity Ratios Liquidity Ratios
Liquidity Ratios Calculation
Liquidity Ratios Calculation
current ratio (times) = current assets__ current liabilities
acid test (times) = current assets - stocks_ or quick ratio current liabilities
defensive interval (days) = quick assets______ (current assets – stocks)
average daily cash from operations
Investment Ratios Investment Ratios
earnings per share = profit after tax - preference share dividends or number of ordinary shares in issueeps (pence)
dividend per share = total dividends paid to ordinary shareholders
number of ordinary shares in issue dividend cover = earnings per share
dividend per share
Investment Ratios Calculation (1)
Investment Ratios Calculation (1)
dividend yield % = dividend per share
share price price/earnings ratio = current share priceor epsP/E ratio capital expenditure to sales % = capital expenditure for year
sales capital expenditure to gross fixed assets % = capital expenditure for year___
gross value of tangible fixed assets
Investment Ratios Calculation (2)
Investment Ratios Calculation (2)
Financial Ratios Financial Ratios
Financial Ratios Calculation (1)
Financial Ratios Calculation (1)
gearing = long-term debt equity + long-term debt debt equity ratio = long-term debtor leverage (D/E) equity
Financial Ratios Calculation (2)
Financial Ratios Calculation (2)dividend cover (times) = earnings per
share (eps) dividend per share
interest cover (times) = profit before gross interest and tax gross interest payable
which way also be considered in terms of cash flow:
cash interest cover (times) = net cash inflow from operations + interest received interest paid
cash flow and cash ratios are becoming increasingly as important as profit and profitability ratios in the measurement of business performance there is no best way of evaluating financial performance and there are advantages and disadvantages in using earnings per share or cash flow as the basis of measurement
The Best Performance Measure – Cash or
Profit?
The Best Performance Measure – Cash or
Profit?
Format 1 Profit and Loss
Account
Format 1 Profit and Loss
Account
The Advantages and Disadvantages of Using
Cash Flow as a Measure of Company Performance
The Advantages and Disadvantages of Using
Cash Flow as a Measure of Company Performance
Format 1 Profit and Loss
Account
Format 1 Profit and Loss
Account
The Advantages and Disadvantages of Using
Earnings per Share (eps) as a Measure of Company
Performance
The Advantages and Disadvantages of Using
Earnings per Share (eps) as a Measure of Company
Performance
Tomkins plc EBITDA for 1998 to 2002
Tomkins plc EBITDA for 1998 to 2002
earnings before interest, tax, depreciation and amortisation, EBITDA is now commonly used as a close approximation of a cash flow performance measure
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