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BTEC Unit 5 Business Accounting P5 (Pass)
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BTEC Unit 5 Business Accounting P5 (Pass)
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P5: Mr. Han`s companyPerform ration analysis to measure the profitability, liquidity and
efficiently of an organisation.
For this assignment I am going to perform ration analysis to measure
the profitability, liquidity and efficiently of an organisation. The
organisation I am going to use for this assignment is the company of
Mr. Han.
There are 3 kinds of ratio analyses:
Profitability:
Profitability is a calculation of the profit of the firm in
relationship to another. It allows for a more complete look of
the firm by comparing one figure to another. There are 3
profitability ratios which we will be looking at; gross profit
percentage of sales, net profit percentage of sales and return
on capital employed.
Liquidity:
Liquidity is how the business is able to meet short-term debts.
There are two kinds of liquidity ratios I will be explaining;
current ratios and acid test ratio. This ratio shows the amount
of assets a business owns compared to the liabilities. It is
expressed as X:1.
Efficiency:
Efficiency ratio shows how good a business is controlling their
key aspects like; finance and primarily stock. There are three
kinds of efficiency ratios I will be explaining; debtor’s payment
period, creditors payment period and rate of stock turnover.
Gross profit percentage: This ratio shows the gross profit as a
percentage of the sales turnover. The formula for the gross profit is:
Gross Profit/Sales Turnover*100. The answer will show for every €1
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