Free Essays on Shouldice Hospital Case Analysis

Free Essays on Shouldice Hospital Case Analysis

  • Submitted By: Nachen
  • Date Submitted: 05/13/2015 1:56 PM
  • Category: English
  • Words: 1304
  • Page: 6

Simple Tools and Techniques for Enterprise Risk Management, Second Edition
by Robert J. Chapman
Copyright © 2011, John Wiley & Sons, Ltd.

Appendix 5
Financial Ratios
This appendix should be read in conjunction with Section 8.7.1.

The following ratios may be used to evaluate the profitability of a business.
Return on Ordinary Shareholders’ Funds
The return on ordinary shareholders’ funds (ROSF) compares the amount of profit for the
period available to the ordinary shareholders with the ordinary shareholders’ stake in the
business. The ratio, which is normally expressed in percentage terms, is given by

net profit after taxation and preference dividend (if any)
× 100.
ordinary share capital plus reserves

The net profit after taxation and after any preference dividend is used in calculating the ratio
as this figure represents the amount of profit available to the ordinary shareholders.
Return on Capital Employed
The return on capital employed (ROCE) is a fundamental measure of business performance.
The ratio expresses the relationship between the net profit generated by the business and the
long-term capital invested in the business. The ratio is expressed in percentage terms as

net profit before interest and taxation
× 100.
share capital + reserves + long-term loans

It should be noted that the profit figure used in the ratio is the net profit before interest and
taxation. This figure is used because the ratio attempts to measure the returns to all suppliers
of long-term finance before any deductions for interest payable to lenders or payments of
dividends to shareholders are made. ROCE is considered by many to be a primary measure of
profitability as it compares inputs (capital invested) with outputs (profit). This comparison is
of vital importance in assessing the effectiveness with which funds have been deployed.
Net Profit Margin
The net profit margin relates the net profit for the period to the sales during...

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