Final Accounts
This set of accounts includes the profit and loss statement and the balance sheet.
What is final accounts?
Assets that are expected to be used by the business for more than 12 months.
What are non-current assets?
This ratio shows gross profit as a percentage of sales revenue.
What is the gross profit margin?
This ratio measures a firm’s ability to pay short-term debts using current assets.
What is the current ratio?
This ratio measures how many times stock is sold during a year.
What is stock turnover?
This statement shows the trading performance of a firm over a period of time.
What is the profit and loss statement?
Debts that must be paid within one year.
What are current liabilities?
The profitability ratio calculated using profit before interest and tax and sales revenue.
What is the profit margin?
The ideal benchmark range for the current ratio.
What is 1.5 to 2 : 1?
This ratio measures how long customers take to pay for goods bought on credit.
What is debtor days?
These are costs that can be directly linked to the production of a good or service.
What is cost of sales (direct costs)?
The value of the business that belongs to the owners.
What is equity?
This ratio measures how efficiently a firm uses its capital to generate profit.
What is return on capital employed (ROCE)?
This liquidity ratio excludes stock from current assets.
What is the acid test (quick) ratio?
This ratio measures how long a firm takes to pay its suppliers.
What is creditor days?
DOUBLE JEOPARDY!!! The term used instead of “profit” for a non-profit organization.
What is a surplus?
The method of depreciation calculated as
(Purchase cost − Residual value) ÷ Lifespan.
What is straight-line depreciation?
This figure equals equity plus non-current liabilities.
What is capital employed?
The ideal benchmark for the acid test ratio.
What is 1 : 1?
DOUBLE JEOPARDY!!! A stock turnover rate that is generally better for a business.
What is a faster stock turnover rate?
Assets that are non-physical but can generate revenue for a business.
What are intangible assets?
This type of depreciation is based on the number of units produced.
What is production depreciation?
A strategy to improve profitability by lowering overhead costs such as rent or wages.
What is reducing indirect costs?
One reason the acid test ratio is considered more conservative than the current ratio.
What is stock may not be easily converted into cash?
A ratio of 50% or more indicates a business is highly dependent on debt.
What is a high gearing ratio?