Interpreting financial statements

Gross profit margin meaning

the amount of gross profit generated from sales

Gross profit margin formula

gross profit/revenue x 100

Operating profit percentage meaning

amount of operating profit generated from sales

Operating sales formula

operating profit/revenue x 100

What do profitability ratios do?

measure an organisations ability to make profits

Why is profit important?

it gives investors returns and provides funds for reinvestment in the business

What is a ratio analysis?

a technique used to interpret financial information

What is Liquidity?

measures the ability of an organisation meeting its short term financial obligations

what is teh current ration used for?

to assess the companys ability to meet its current liabilities

current ratio formula

current assets/current liabilities = x:1

Acide test ratio formula

current assets - inventories/ current liabilities = x:1