use with business accounting and finance second edition by catherine gowthorpe isbn 1-84480-200-0 ©...

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0

© 2005 Thomson Learning



• Performance ratios - assess the relative success of the business

• Liquidity ratios - assess the extent to which assets cover business liabilities

• Efficiency ratios - assess the management and utilisation of assets

• Investor ratios - assess items of particular interest to investors• Lending ratios - assess financing relationships



Example: Bilton Burgess plc



• Return on capital employed (ROCE)– Pre-tax ROCE



• Return on capital employed (ROCE)– Return on total investment



• Current ratio



• Quick (acid test) ratio



• Fixed asset turnover ratio



• Stock turnover



• Stock turnover in days



• Debtors turnover ratio



• Creditors turnover ratio



• Dividend per share



• Dividend cover



• Earnings per share



• Price/earnings ratio (P/E ratio)



• Price/earnings ratio (P/E ratio) - comparison– Bilton Burgess plc: 13.1– Abacus Casement plc: 18.4– Carew Grapeshot plc: 10.3

P/E measures the market’s perception of a company’s shares

Higher P/E - shares more highly regarded, perhaps less riskyLower P/E - shares may be more risky



P/E ratios - more examples

Examples of P/E ratios of companies listed on the London Stock Exchange

Company P/E

Boots 15.6Dixons 18.6Marks & Spencer 19.2Ted Baker 24.7



• Gearing



• Gearing (alternative calculation)



• Interest cover

use with business accounting and finance second edition by catherine gowthorpe isbn 1-84480-200-0 ©...

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