Calculation And Understanding Of Accounting Ratios
Gbogbo ọrọ náà
A set of financial statements is full of figures, but a figure on its own rarely tells you whether a business is doing well. A profit of $15 000 sounds healthy until you learn the owner has tied up $1 000 000 to earn it. Accounting ratios solve this by setting one figure against another, turning raw numbers into percentages, proportions and time periods that can be read at a glance and compared fairly.
In this lesson you will learn to calculate and understand the ratios Cambridge asks for again and again: the profitability ratios (gross margin, profit margin and return on capital employed), the liquidity ratios (current and acid test), and the efficiency measures (rate of inventory turnover, trade receivables turnover and trade payables turnover). Each one comes with its formula, a worked calculation and the meaning behind it, so you can not only find the number but explain what it tells you.
Ebumnobi
- gross profit margin.
- mark-up.
- profit margin.
- return on capital employed (ROCE).
- current (working capital) ratio.
- acid test (liquid) ratio.
- rate of inventory turnover (times).
- inventory turnover (days).
- trade receivables turnover (days).
- trade payables turnover (days).
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Akwụkwọ Ọmụmụ
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Nnyocha Ọmụmụ
Ekele diri gi maka imecha ihe karịrị na Calculation And Understanding Of Accounting Ratios. Ugbu a na ị na-enyochakwa isi echiche na echiche ndị dị mkpa, ọ bụ oge iji nwalee ihe ị ma. Ngwa a na-enye ụdị ajụjụ ọmụmụ dị iche iche emebere iji kwado nghọta gị wee nyere gị aka ịmata otú ị ghọtara ihe ndị a kụziri.
Ị ga-ahụ ngwakọta nke ụdị ajụjụ dị iche iche, gụnyere ajụjụ chọrọ ịhọrọ otu n’ime ọtụtụ azịza, ajụjụ chọrọ mkpirisi azịza, na ajụjụ ede ede. A na-arụpụta ajụjụ ọ bụla nke ọma iji nwalee akụkụ dị iche iche nke ihe ọmụma gị na nkà nke ịtụgharị uche.
Jiri akụkụ a nke nyocha ka ohere iji kụziere ihe ị matara banyere isiokwu ahụ ma chọpụta ebe ọ bụla ị nwere ike ịchọ ọmụmụ ihe ọzọ. Ekwela ka nsogbu ọ bụla ị na-eche ihu mee ka ị daa mba; kama, lee ha anya dị ka ohere maka ịzụlite onwe gị na imeziwanye.
- Which ratio measures the profit earned for every $100 of capital used in the business? A. Gross margin B. Profit margin C. Return on capital employed D. Current ratio Answer: C
- A business has revenue of $80 000 and gross profit of $20 000. Its gross margin is: A. 20% B. 25% C. 40% D. 400% Answer: B
- Current assets are $30 000, inventory is $12 000 and current liabilities are $15 000. The acid test ratio is: A. 0.80 : 1 B. 1.20 : 1 C. 2.00 : 1 D. 2.80 : 1 Answer: B
- Cost of sales is $90 000 and average inventory is $9 000. The rate of inventory turnover is: A. 0.1 times B. 9 times C. 10 times D. 90 times Answer: C
- Capital employed is calculated as: A. Capital only B. Capital plus current liabilities C. Capital plus non-current liabilities D. Current assets minus current liabilities Answer: C
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Akụkụ akwụkwọ
Examine the Efficiency of Inventory Management Using Financial Ratios
"Principles of Accounting, Volume 1: Financial Accounting: Examine the Efficiency of Inventory Management Using Financial Ratios" by OpenStax, OpenStax, Rice University, licensed under CC BY-NC-SA 4.0 (https://creativecommons.org/licenses/by-nc-sa/4.0/). Source: https://openstax.org/books/principles-financial-accounting/pages/10-5-examine-the-efficiency-of-inventory-management-using-financial-ratios. Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-introduction
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Akụkụ akwụkwọ
Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity
"Principles of Accounting, Volume 1: Financial Accounting: Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity" by OpenStax, OpenStax, Rice University, licensed under CC BY-NC-SA 4.0 (https://creativecommons.org/licenses/by-nc-sa/4.0/). Source: https://openstax.org/books/principles-financial-accounting/pages/5-3-apply-the-results-from-the-adjusted-trial-balance-to-compute-current-ratio-and-working-capital-balance-and-explain-how-these-measures-represent-liquidity. Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-introduction
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