Ratios and Formulas

• Capital employed = longterm liabilities + shareholder funds
• Return on Capital Employed = Net profit / Capital Employed x 100
• Current ratio = current assets / current liabilities
• Acid Test = (Current assets - stock) / current liabilities
• Gearing = Long Term Liabilities / capital employed x 100
• Payback = income required / net cash flow in a year x 12
• ARR = average annual profit / investment x 100