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Topic 2d Ratio Definitions.pptx

Topic 2d Ratio Definitions.pptx - Analysing Performance...

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Analysing Performance with Ratios Topic 2d – Ratio Definitions
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FINANCIAL RATIO DEFINITIONS Appendix
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Major Ratios Groups Performance Analysis Efficiency & Operating Profit Margin Activity & Asset Turnover Profitability and Drivers Liquidity and Risk Analysis Leverage (Risk & Financial Structure) Liquidity Ratios Cash Flow Analysis
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Performance - Efficiency Ratios Measure the efficiency in sales, cost of sales and expense management. Growth in Sales Change in Sales Sales Last Year Expense Management Expense Category Sales = = Gross Profit Margin Gross Profit Sales = Summary Measure = Operating Profit Margin
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Performance – Operating Profit Margin Ability of the company to turn sales into profits Also called Return on Sales Normally EBIT as numerator but can be Net Profit Operating Profit Margin EBIT Sales = Net Profit Margin (Return on Sales - ROS) Net Profit Sales =
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Performance - Activity & Asset Turnover Measure the level of asset commitment and the degree of asset usage.
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