Unit 2 Business Resources Task 3

Ratio Analysis Explanation



Profitability Ratios

Gross Profit – 54%


The College Shop has a gross profit percentage of sales of 54%. Therefore this means
that for every £1 of sales made, 54p is left as g ross profit.

The formula to work out gross profit is:




Net Profit

The College Shop has a net profit percentage of sales of 31%. This means that for every
£1 of sales made, 31p is left as net profit.

The formula to work out net profit is:




Capital Employed

The College Shop has a ROCE of 113% that means for every £1 tied up in the business,
£1.13 is being generated in the business.




Liquidity
Current Ratio
Current Assets
___________
Current Liabilities

The College Shop has a current ratio of 2.74:1 which means that for every £2.74 owned
in current assets, it owes £1.00 in current liabilities.