Ratios!

Ratios to compare the profitability and liquidity of a company from year to year and compare different companies performances in the same type of business.

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Liquidity Ratios

Liquidity

Current Ratio =

Current Assets ÷ Current Liabilities : 1

Acid Test Ratio =

(Current Assets - Stock) ÷ Current Liabilities : 1


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Profitability Ratios

Profitability

ROCE (Return on capital employed) =

Net Profit ÷ Capital Employed x 100

Gross Profit Margin

Gross Profit ÷ Sales x 100

Net Profit Margin

Net Profit ÷ Sales x 100

Stockturn

Cost of Sales ÷ Average Stock

Average Stock = Opening Stock + Closing Stock ÷ 2



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