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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

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