3.5 Profitability & liquidity ratio analysis

Accounting ratios

• $Profitability ratios$
    * Gross profit margin (%):

   
  * Net profit margin (%):

     
  * Return on capital employed (%):

     
    * Capital employed: = (non-current assets + current assets) current liabilities or non-current liabilities + shareholders’ equity. The total capital invested in the business.

• $Liquidity ratios$
    * Current ratio:

   
  * Acid test ratio:

   
  * Liquid assets = Current assets - Inventories