Chapter 13 - Performance measurement and control Flashcards Preview

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Flashcards in Chapter 13 - Performance measurement and control Deck (18)
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1

What are the four main profitability ratios?

-Gross profit margin
-Operating profit margin
-Return on capital employed
-Asset turnover

2

How do you calculate the Gross profit margin

(Gross profit) ÷ (Turnover) x 100

3

How do you calculate the Operating profit margin

(Operating profit) ÷ (Turnover) x 100

4

How do you calculate Return on capital employed

(Operating profit) ÷ (Capital Employed) x 100

or

Operating profit x asset turnover

5

How do you calculate capital employed

Total assets - current liabilities
or
Total equity + long term debt

6

How do you calculate Asset turnover

(Turnover) ÷ (Capital Employed)

7

What are the five liquidity ratios?

-Current ratio
-Quick ratio (acid test)
-Inventory days
-Receivables days
-Payables days

8

How do you calculate the current ratio?

(Current assets) ÷ (Current liabilities)

9

How do you calculate the quick ratio?

(Current assets- Inventory) ÷ (Current liabilities)

10

How do you calculate the Inventory days

(Inventory) ÷ (Cost of sales) x 365

11

How do you calculate the Receivables days

(Receivables) ÷ (Credit sales) x 365

12

How do you calculate the Payable's days

(Payables) ÷ (Credit purchases) x 365

13

What are the three risk ratios?

-Financial gearing
-Interest cover
-Dividend cover

14

How do you calculate financial gearing?

(Debt) ÷ (Equity) x 100

or

(Debt) ÷ (Debt + Equity) x 100

15

How do you calculate Interest cover

(Operating profit) ÷ (Finance costs)

16

How do you calculate Dividend cover

(Net profit) ÷ (Dividend)

17

What does a high level of gearing mean?

That a company relies heavily on debt to finance its long term needs

18

What are the four key perspectives of the balanced scorecard?

-Customer
-Internal
-Innovation and learning
-Financial