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.

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• $Liquidity ratios$   * Current ratio:

      * Acid test ratio:

      * Liquid assets = Current assets - Inventories

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