Lernmaterialien für Financial Management an der Universität St. Gallen

Turnover ratio

Number of times per year the investment in current assets is converted into turnover

CA turnover = Turnover / Average current assets

Liquidity Ratio

Compare all current assets and current liabilities

Current ratio = Current assets / current liabilities 

< 1 => 

1. Return on assets

2. Return on equity

3. Return on shareholders equity

1. Current ratio

2. Quick (acid-test) ratio

3. Cash ratio 

Profitability

=> how efficient are total assets utilised to generate turnover

ROA (%) = (Profit after tax / Average total assets) * 100

Turnover Ratio

Indicates efficiency with which assets generate turnover 

TA (times) = Turnover / Average total assets

When TA improves while profit margins stay same => ROA should increase 

Profitability

Includes ordinary share capital AND reserves

ROSHE (%) = ((Profit after tax - non-controlling interest - preference dividends) / Average ordinary shareholders' equity) * 100

Portion of revenue after operating expenses 

OP (%) = (Operating Profit / Revenue) *100 

Increase OP = positive 

Investors look for strong, consistent OP

Mark-up (%) = (Gross profit / cost of sales) * 100

Profitability

Includes preference & ordinary shareholders, excludes non-controlling interest

ROSE (%) = ((Profit after tax - non-controlling interest) /Average shareholders' equity) * 100

Turnover Ratio 

Evaluates the utilisation of a companies investment in PPE

PPE turnover = Turnover / Average PPE @ carrying value 

Carrying value = cost price - accumulated depreciation 

Profit Margin

Portion of turnover after tax 

NP = (Profit after tax / Revenue) * 100