3.5 Profitability & liquidity ratio analysis

Accounting ratios

  • ProfitabilityratiosProfitability 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.

  • LiquidityratiosLiquidity ratios
    • Current ratio:

   

  • Acid test ratio:

   

  • Liquid assets = Current assets - Inventories