1. Read the question carefully
Decide whether you need to use Profitability or Liquidity Ratios
Performance = Both Profitability and Liquidity
2. Using a margin, jot down words you could use
3. Look at the financial data to see what ratios you should use.
4. Produce a table of ratios and answers.
E.g.
2009 2008
Gross Profit Percentage
Net Profit Percentage
ROCE
5. Double Check Answers
6. Work out the percentage differences between Sales Revenue, Gross Profit and Net Profit (these aren't the 5 ratios, they just help :D)
7. Comment on what has happened to the ratios (over the two years), a) How they have changed, and b) Why do you think this is so.
8. Make a judgement on whether you think the profitability/liquidity of the business has improved, with reasons why.
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