NOTE: I advise you download the free Task 3 Excel sheet to help you complete this task.
This is the final task of Unit 5 containing P5, M2 and D2 in which you need to perform a ratio analysis using the sheet from Task 3. Then, you need to Analyse and evaluate the performance of the given business ...
P5 – Perform rato aaaalysiy to meayure the proftaasiasitly asiqusidsitl aad effsieafl of a gsivea
orgaasiyatoa.
In this task, I am going to use SIGNature Ltd’s balance sheet and proft and loss account to perform a
ratio analssis iithin the three tspes of ratios; Liuuidits, rroftabilits and ffciencs.E
Liuuidits Ratios
Liuuidits Ratios are tspes of ratios that measure hoi good SIGNature Ltd are doing in terms of being
able to cover and pas back their debts iithin a short term.E There are tio diferent liuuidits ratios
that are used for SIGNature Ltd; the Current Ratio and the Acid Test Ratio.E Current Ratio is hoi
much SIGNature Ltd can cover their liabilities iith their assets.E Acid Test Ratio shois hoi much a
business can cover their liabilities iith the cash that thes have.E
Means that SIGNature Ltd can easils cover their liabilities as thes have three times as much cash to
cover their liabilities.E
rroftabilits Ratios
rroftabilits Ratios are tspes of ratios that shoi hoi much proft SIGNature Ltd have made at the
end of the sear.E There are three diferent ratios iithin the proftabilits ratios; Gross rroft Margin,
Net rroft Margin and RoCf.E Gross rroft Margin is a ratio of hoi much proft thes have made afer
their purchases and stock have been bought.E Net rroft Margin is a ratio ihere it shois the proft
SIGNature Ltd afer thes have paid of their expenses.E
Groyy Proft Margsia = Groyy Proft/Turaover x 100
256,000/444,000 x 100 = 57.E7%
Means that SIGNature Ltd have a high Gross rroft margin, therefore making a lot of proft.E
Net Proft Margsia = Net Proft/Turaover x 100
45,960/444,000 x 100 = 10.E4%
Means that SIGNature Ltd have a loi Net rroft margin, therefore despite that thes’re still making
proft, thes ion’t be making a lot of proft bs the end of the sear.E
RoCE (Retura oa Capsitaa Empaoled) = Proft/Capsitaa Empaoled x 100 (Capsitaa Empaoled = Totaa
Ayyety – Curreat Lsiaasiasitey)
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