ratios

Acid Test Ratio

(Current Assets – closing stock): Current Liabilities

Liquidity

ability of a business to pay its current liabilities

as they fall due.

Profit and Loss account

records the sales less expenses of the organisation for the financial year. identifies the Gross and Net

profit of the organisation.

Debtors

Individuals or businesses that owe the business money after buying goods and services on credit

Dividend

is the portion of profits paid to shareholders at the end of the year.

decided and announced at the AGM annually.

board of directors establishs the company's dividend policy.

Debt/Equity Ratio Explanation

Compares long term funding of the business -

Acid Test Ratio Explanation

Removes closing stock from current ratio as it can be slow to sell

Return on Investment (ROI) (Profitability Ratio)

(Net Profit/Capital Employed) x 100

Current Ratio (Liquidity Ratio)

Current Assets: Current Liabilities

Debt/Equity Ratio (Gearing Ratio)

Debt Capital : Equity Capital

Limitations of ratio analysis results:

staffing(turnover);

assets(overvalued);

market (competitors);

econ variables