3.5 BM - profitability, liquidity ratios

A comparison between two numbers showing how many times one number exceeds the other.

• return on investment
• profitability ratios
• ratio
• efficiency ratios

Financial ratios that tell how well a company can pay off its short-term debts and meet unexpected needs for cash.

• liquidity ratios
• efficiency ratios
• leverage ratios
• profitability ratios

Financial ratios that indicate how effectively a company uses its resources to generate sales.

• liquidity ratios
• leverage ratios
• profitability ratios
• efficiency ratios

Profitability ratios are important to who?

• Customer

• Owner

• Board members

A Business Has The Following:

Fixed Assets = £6000

Current Assets = £2000

Inventory = £1000

Current Liabilities = £500

Calculate It's Current Ratio

• 1 : 4

• 1 : 5

• 1 : 2

• 1 : 3

• 1 : 6

What is the correct definition of Positive Liquidity

• A business has enough cash to pay off their liabilities.

• A business does not have enough cash to pay off their liabilities.

• A business has enough fixed assets to sell in order to pay off their current liabilities

• A business has a greater amount of fixed assets than current assets.

• A business has more money going going to creditors than it is receiving from debtors.

What is the correct calculation for the liquid capital ratio?

• Gross Profit / Turnover * 100

• Net Profit / Turnover * 100

• Total Current Assets / Total Current Liabilities

• (Current Assets - Inventory) / Current Liabilities

A Business Has The Following:

Fixed Assets = £6000

Current Assets = £2000

Inventory = £1000

Current Liabilities = £500

Calculate It's Liquid Capital Ratio

• 1 : 2

• 1 : 12

• 1 : 4

• 1 : 12.5

• 1 : 8

What is the correct calculation for the gross profit margin?

• Gross Profit / Turnover * 100

• Net Profit / Turnover * 100

• Total Current Assets / Total Current Liabilities

• (Current Assets - Inventory) / Current Liabilities

What is the correct calculation for the net profit margin?

• Gross Profit / Turnover * 100

• Net Profit / Turnover * 100

• Total Current Assets / Total Current Liabilities

• (Current Assets - Inventory) / Current Liabilities