P7, M3, D2 Unit 2
Ratio Analysis
Task 1 (P7)
Using the profit and loss account and the balance sheet for P5, help the owner of the business
interpret the results by completing the table below.
Ratio Formula Calculation/Interpretation
Liquidity
Current ratio Current assets 175
Current liabilities 110 = 1.6
Acid test Current assets – stock 175 - 125
Current liabilities 110 = 0.5
Profitability
Gross profit Gross profit 200
percentage Turnover x100 800 x100 =25%
Net profit Net profit 60
percentage Turnover x100 800 x100 =7.5%
Return on capital Net Profit Before Tax 60
employed Capital Employed x100 120 x100 =50%
Performance (efficiency)
Stock turnover Stock 125
Cost of sales x365 600 x365 =76 days
Debtors’ collection Debtors 50
period Turnover x365 800 x365 =23 days
Asset turnover Turnover 800
Net assets 65 =12.3
Ratio Analysis
Task 1 (P7)
Using the profit and loss account and the balance sheet for P5, help the owner of the business
interpret the results by completing the table below.
Ratio Formula Calculation/Interpretation
Liquidity
Current ratio Current assets 175
Current liabilities 110 = 1.6
Acid test Current assets – stock 175 - 125
Current liabilities 110 = 0.5
Profitability
Gross profit Gross profit 200
percentage Turnover x100 800 x100 =25%
Net profit Net profit 60
percentage Turnover x100 800 x100 =7.5%
Return on capital Net Profit Before Tax 60
employed Capital Employed x100 120 x100 =50%
Performance (efficiency)
Stock turnover Stock 125
Cost of sales x365 600 x365 =76 days
Debtors’ collection Debtors 50
period Turnover x365 800 x365 =23 days
Asset turnover Turnover 800
Net assets 65 =12.3
