Our training

Courses by theme

Courses by subject

Dates

Non-exam assessment (NEA)

Exams

Results

Assessment Services

Products

News and Insights

Assessment Reform

A-level Accounting₇₁₂₇

Specification7127

7127

A-level Accounting Specification for first teaching in 2017

A-level Accounting Specification for first teaching in 2017

PDF | 1.37 MB

Appendix: accounting ratios

Students will be required to know the formulae for the following accounting ratios.

Ratio	Formula
Capital gearing	$\frac{Non-current liabilities}{Issued share capital + Reserves + Non-current liabilities} x 100$
Current ratio	$\frac{Current assets}{Current liabilities}$ Expressed as x:1
Dividend cover	$\frac{Profit after interest and tax}{Ordinary share dividends paid}$
Dividend yield	$\frac{Dividend per share}{Market price per share} x 100$
Earnings per share	$\frac{Earnings in pence (ie profit after tax in pence)}{Number of issued ordinary shares}$ Note: for a group the ratio is: Profit attributable to ordinary shareholders of the parent company (Profit after tax in pence)/Number of issued ordinary shares.
Expenses in relation to revenue	$\frac{Expenses}{Revenue} x 100$
Gross profit margin	$\frac{Gross profit}{Revenue} x 100$
Interest cover	$\frac{Profit before interest and tax}{Interest payable}$
Liquid capital ratio (acid test ratio)	$\frac{Current assets - inventory}{Current liabilities}$ Expressed as x:1
Markup	$\frac{Gross profit}{Cost of sales} x 100$
Price earnings	$\frac{Current market price}{Earnings per share}$
Profit in relation to revenue	$\frac{Profit for year (before tax)}{Revenue} x 100$
Rate of inventory turnover	$\frac{Cost of sales}{Average inventory}$ Average inventory: normally the average of the opening and closing inventories.
Rate of inventory turnover (days)	$\frac{Average inventory}{Cost of sales} x 365$
Return on capital employed (sole trader)	$\frac{Profit before interest}{Capital employed} x 100$ Capital employed is capital + non-current liabilities (either opening or closing capital could be used in the calculation).
Return on capital employed (limited company)	$\frac{Profit from operations}{Capital employed} x 100$ Capital employed is Equity + non-current liabilities (either opening or closing figure for equity could be used in the calculation).
Trade payable days	$\frac{Trade payables}{Credit purchases} x 365$
Trade receivable days	$\frac{Trade receivables}{Credit sales} x 365$

5.0 General administration

Appendix: international terminology

A-level Accounting 7127 | Specification | Appendix Accounting Ratios | AQA