PEV - Ratio Analysis

princess

Hello
I am resiting this paper and last time i failed section 2. I was just wondering if anyone had any "idiots" guide to the ratios?? I get stuck with the RONA and ROCE besides all the others!!

Would be really grateful if anyone could help!! (PLEASE)!!

dobbieobby

RONA=
Profit from operations / Net Assets x 100

ROCE=
Profit from opersations / Capital Employed x 100

The answer is really in the letters, ROCE = Capital Employed (or just Capital)

RONA is on Net Assets.

You only need to remember the Profit from Operations bit really :-)

dobbieobby

Oh, and in those exams it's 'Net Profit', not 'Profit from Operations'
Sorry, I'm doing DFS, so it's had a name change!

SandyHood

Do you think it would help you if I did a class on ratios (say an hour) and it was broadcast to your computer?

donnaalwill

I know what you mean about ratios, I am still stuck on a few myself. One I am definitely struggling to understand is the Gearing Ratio, I have searched posts and can see its debt/ debt + equity or debt/ equity from previous threads but I am finding it hard to relate without anything work work by. For example in the PEV June 2007 exam, Q2.1 viii) it asks for gearing.
Is the debt the long-term borrowing figure? And this may seem like a ridiculous question but what part is the equity figure? I have tried to jumble some figures around to see what makes up the answer but I haven't had much success. If anyone could point me in the right direction as to what figures each ones mean it would be appreciated. Thanks.

AK002

SandyHood wrote: »

Do you think it would help you if I did a class on ratios (say an hour) and it was broadcast to your computer?

Yes!

A-Vic

SandyHood wrote: »

Do you think it would help you if I did a class on ratios (say an hour) and it was broadcast to your computer?

Yes please

dobbieobby

Me too!

jow774

Please Sandy, me too!

acc1077

And me too please

SandyHood

I am definitely struggling to understand is the Gearing Ratio, I have searched posts and can see its debt/ debt + equity or debt/ equity

Rather than worry about more than one ratio, I recommend (and only teach PEV students) one formula debt/ debt + equity

Is the debt the long-term borrowing figure?

Yes

Not quite answering the: what part is the equity figure? question
[size=+2]But debt + equity is the same as total assets - current liabilities (or fixed assets + net current assets)[/size]

So often PEV papers don't have full balance sheet - instead a list of assets and liabilities
if they do you can find the gearing by calculating

longterm borrowings
total assets less current liabilities

donnaalwill

Thats great, thanks Sandy! Its not covered in my textbook and just couldn't grasp the specifics of it. Thats much easier to understand I'll work on remembering that now I know which figures to focus on. Thank you

SandyHood

Link if you'd like to attend the webinar

Ratio analysis and the interpretation of performance indicators


Date/time of webinar: 15.00 on Friday 27 November 2009
Presenter: Sandy Hood
Duration: 60 mins

Click through the link to find out how to register.

donnaalwill

I'm glad I have that day off work for study leave so will be able to be there, I have registered my interest to the email address - thanks.

acc1077

Thank you Sandy - I too have registered

princess

acc1077 wrote: »

Thank you Sandy - I too have registered

Thanks Sandy, I have also registered!!