a) List six users of accounting information (b) State the formula and the use of each of the following accounting ratios: i. Quick ratio ii. Net profit marg...

Assessment: WAEC SSCE - Financial Accounting - 2018 (Essay) Subject: Financial Accounting

Question 1 Report

a) List six users of accounting information

(b) State the formula and the use of each of the following accounting ratios:
i. Quick ratio
ii. Net profit margin
iii. Total assets turnover
iv. Creditors payment period (in days)

Answer

Ratio	Formula	Use
i. Quick (acid-test) ratio	\( \dfrac{\text{Current assets} - \text{Stock}}{\text{Current liabilities}} \)	Measures the ability to meet current liabilities from the most liquid assets, without relying on the sale of stock.
ii. Net profit margin	\( \dfrac{\text{Net profit}}{\text{Net sales}} \times 100 \)	Shows overall profitability after all expenses, per unit of sales.
iii. Total assets turnover	\( \dfrac{\text{Net sales}}{\text{Total assets}} \)	Measures how efficiently total assets are used to generate sales.
iv. Creditors payment period (days)	\( \dfrac{\text{Creditors}}{\text{Net credit purchases}} \times 365 \)	Shows the average number of days taken to pay suppliers/creditors.

Ratio	Formula	Use
i. Quick (acid-test) ratio	\( \dfrac{\text{Current assets} - \text{Stock}}{\text{Current liabilities}} \)	Measures the ability to meet current liabilities from the most liquid assets, without relying on the sale of stock.
ii. Net profit margin	\( \dfrac{\text{Net profit}}{\text{Net sales}} \times 100 \)	Shows overall profitability after all expenses, per unit of sales.
iii. Total assets turnover	\( \dfrac{\text{Net sales}}{\text{Total assets}} \)	Measures how efficiently total assets are used to generate sales.
iv. Creditors payment period (days)	\( \dfrac{\text{Creditors}}{\text{Net credit purchases}} \times 365 \)	Shows the average number of days taken to pay suppliers/creditors.

Miscellaneous Accounts

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