Final Accounts

• • Ratios are used to compare and assess financial performance
• What are the Profitability Ratios?


  • Gross Profit Margin, Net Profit Margin, Return on Capital Employed (ROCE)
• What are the Liquidity Ratios?


  • Current Ratio & Acid Test Ratio
• • Gross profit margin = Gross profit/Revenue x 100
  • The % of revenue which becomes profit
• • Net profit margin = Net profit/Revenue x 100
  • The % of profit which becomes net profit
• • ROCE = Net profit before interest & tax / Total capital employed x 100
  • The % of capital employed which is returned by net profit
• • Capital Employed = Shareholders' funds + reserves + long-term liabilities
• • Working Capital = Current assets - Current liabilities
• • Current ratio = Current assets/Current liabilities
  • The amount of current assets compared to the amount o0f current liabilities and it measures liquidity (accessible cash)
• • Acid test/Quick ratio = Current assets - Stock / Current liabilities
  • The amount of current assets (without stock) compared to the amount of current liabilities