Put the number (digit) of the relevant ratio next to its defintiion.

1. average interest rate

2. earnings per share

3. return on equity

4. debt/equity ration

5. gross profit margin

6. inventory turnover

7. price/earnings ratio

a gives the company's pricing policy and mark-up margins. An adequate gross margin allows a company to pay its expenses, and then expand.

b determines the average interest rate at which a company borrows funds

c compares the current market price with earnings to calculate if a stock is over or undervalued. Used as a prediction or expectation of future performance.

d. indicates the return a company gets on the owners' investment. Companies that make high returns often do not require more debt investments.

e. shows the turnover of inventory, and can be compared against sales figures, to show the demand for the company's products.

f. indicates what proportion of equity and debt an enterprise uses to finance its assets. A more stringent test is to use just the long-term debt.

g. calculates the profit made o a per-share basis. This is quoted by US publicly held companies in their financial statements.