Formulae for ratio analysis (SL/HL)

Profitability ratios (SL/HL)

Gross profit margin $\text{Gross profit margin} = \frac{\text{gross profit}}{\text{sales revenue}} \times 100$
Profit margin $\text{Profit margin} = \frac{\text{profit before interest and tax}}{\text{sales revenue}} \times 100$
Return on capital employed (ROCE) $\text{ROCE} = \frac{\text{profit before interest and tax}}{\text{capital employed}} \times 100$ where $\text{capital employed} = \text{non-current liabilities} + \text{equity}$

Current ratio $\text{Current ratio} = \frac{\text{current assets}}{\text{current liabilities}}$
Acid test (quick) ratio $\text{Acid test ratio} = \frac{\text{current assets} - \text{stock}}{\text{current liabilities}}$

Stock turnover (number of times) $\text{Stock turnover (times)} = \frac{\text{cost of sales}}{\text{average stock}}$
Stock turnover (number of days) $\text{Stock turnover (days)} = \frac{\text{average stock}}{\text{cost of sales}} \times 365$ where $\text{average stock} = \frac{\text{opening stock} + \text{closing stock}}{2}$
Debtor days ratio (number of days) $\text{Debtor days ratio} = \frac{\text{debtors}}{\text{total sales revenue}} \times 365$
Creditor days ratio (number of days) $\text{Creditor days ratio} = \frac{\text{creditors}}{\text{cost of sales}} \times 365$
Gearing ratio $\text{Gearing ratio} = \frac{\text{non-current liabilities}}{\text{capital employed}} \times 100$ where $\text{capital employed} = \text{non-current liabilities} + \text{equity}$

SL/HL: Average rate of return (ARR) $\text{ARR} = \frac{(\text{total returns} - \text{capital cost}) \div \text{years of use}}{\text{capital cost}} \times 100$
HL only: Net present value (NPV) $\text{NPV} = \sum (\text{present values of return}) - \text{original cost}$

Capacity utilization rate $\text{Capacity utilization rate} = \frac{\text{actual output}}{\text{productive capacity}} \times 100$
Productivity rate $\text{Productivity rate} = \frac{\text{total output}}{\text{total input}} \times 100$