There are a fall of significant relationships, which exists between various items at bottom the balance shred and within the profit and loss account. There are withal relationships between items in different statements.
Ratio analysis is the numeration of numerical relationships. The ratios may be expressed as:
as a number of times (e.g. 12.5 times earnings)
as a ratio of 1 (e.g. 3:1, or 4.2:1)
as a percentage (e.g. 10%)
The Classification of Ratios.
There is no whimsical method of classifying ratios, but a common classification is as follows:
lucrativeness
The majority of businesses come into being in the hope of making profits. Profitability ratios provide an indication as to their success in achieving this aim. They express the profits made in relation to other key figures in the financial statements.
Efficiency
Also referred to as bodily function ratios these measure the efficiency with which certain resources have been used within the business.
Liquidity/Solvency
These ratios measure the ability of the business to meet its contemporary and future obligations.
Investment Ratios
These are concerned with assessing the returns and performance of shares in the business.
Firstly I will calculate the profitability ratios:
Profitability = the relationship between profit and the resources employed in earning it.
profitability ratioS
Gross Profit Ratio
Net Profit ratio
Return on capital employed
Return on shareholders funds
|GROSS PROFIT RATIO | |2008(£m) | |2007(£m) |
| | | | | | |
| Gross profit x coke |= |402.5 x 100 | |376.1 x 100 |
|Sales | |797.4 |...If you want to get a full essay, order it on our website: Ordercustompaper.com
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