Introduction to Marketing-P5
Miriam Emedon
Ratios are calculations that display the information from the accounts in a different way that is easier to analyse business activities. It can sometimes be helpful to have a phrase book when looking at the set of accounts as terms vary from accountant to accountant.
Ratios are important because they can take the complex accounts and turn them into simple figures that show how well a certain area of the business is performing. They look into 3 sets of broad categories which include; profitability, liquidity and efficiency.
Ratio analysis
Gross Profit
256200
Sales Turnover
444000
= 57.7%
Gross profit percentage of sales
This shows how much gross profit is being made in relation to sales. For example a gross profit percentage of 20% means that for £20 of gross profit is made for every £100 worth of sales.
Gross profit for year / sales for year x 100
Net Profit
859600
= 19.4%
Sales Turnover
444000
Net profit percentage of sales
This is similar to the gross profit percentage but shows how much net profit is being made in relation to sales. The more net profit the company makes the better.
net profit for year / sales for year x 100
ROCE (Return on Capital Employed)
Net Profit before Interest and Tax
85960