S-Cool Revision Summary

S-Cool Revision Summary

Acid test ratio

This measures the ability of a business to meet its short-term debts. It is calculated by dividing current assets minus stock by current liabilities.

Asset turnover

This measures the ability of a business to generate sales revenue from its assets. It is calculated by dividing sales revenue by net assets.

Current ratio

This measures the ability of a business to meet its 'current' debts. It is calculated by dividing current assets by current liabilities.

Dividends

This is the total amount of 'profit after tax' that the business will issue to shareholders at the end of the financial year. The remainder of the 'profit after tax' will be retained in the business for re-investment.

Dividend cover

This is the number of times that the dividend that has actually been paid to shareholders could have been paid out of  the 'profit after tax'.

Dividend per share

This is the amount of 'profit after ta' that each shareholder will receive per share that they hold at the end of the financial year.

Dividend yield

This is the dividend per share expressed as a percentage of the current market price of the share. It provides a figure which can be compared with other forms of investment, to see if the yield from the shares is worth the risk of investing the money.

Earnings per share (EPS)

This is the amount of money per share that each shareholder could receive, if the business decided to give all the 'profit after tax' to the shareholders. It is calculated by dividing the profit after tax by the number of ordinary shares.

Gearing

This percentage measures the proportion of capital employed that is funded by long-term liabilities (e.g. loans, mortgages, etc). It is calculated by dividing long-term liabilities by capital employed and multiplying by 100.

Gross profit

This is the sales revenue of a business minus the cost of sales (i.e. minus the direct costs incurred in manufacturing the products which have been sold).

Gross profit margin

This is the gross profit figure expressed as a percentage of the sales revenue figure. It shows the proportion of sales revenue that remains after all direct costs have been accounted for.

Net profit margin

This is the net profit figure expressed as a percentage of the sales revenue figure. It shows the proportion of sales revenue that remains after all expenses have been accounted for.

Price: earnings ratio (PE ratio)

This is a measure of the confidence that the 'City' has for the shares of a particular company. It is calculated by dividing the current market price of the share by the 'earnings per share' figure.

Return on capital employed (ROCE)

This is the profit of the business expressed as a percentage of the 'capital employed' figure. It is often referred to as the 'primary efficiency ratio, and it basically relates the profit to the size of the business.

Stock turnover

This is a measure of the time that a business takes to sell its stock. A supermarket will have a high stock turnover ratio, since it sells many goods on a day-to-day basis. Whereas a retailer such as 'Dixons' will have a much lower stock turnover, since it does not sell its stock as quickly. It is calculated by dividing the cost of sales by the stock figure.