Lesson 10 pp10
- 1. Ratio Analysis Question 10
- 2. RATIO 2009 Industry Performance Gross Profit Ratio 75% 70% Money left over after sales less the cost of goods sold. It is the profit before all other expenses. A high percentage is good, and a low percentage is bad Ways to improve include: increase the selling price/sales or decrease the cost of purchases Net Profit Ratio 22% 21% The final profit left over at the end of the accounting period. It takes into account everything. The higher the percentage the better strategies to improve include: cutting down specific expenses or increase sales Liabilities to Equity 68% 15% Shows the percentage of total debt within a business to assets The lower the percentage the better it is for a business, the higher the percentage the more debt the business has Strategies to improve; selling assets, look to increase sales and decrease expenses Current Ratio 7.6 3.1 Expressed as a decimal and shows how many times current assets are bigger than current liabilities. The higher the decimal count, the better it is for the business. Anything that is current is considered short term. Cash etc Strategies to improve the current ratio, selling assets, look to increase sales and decrease expenses Quick Ratio 5.0 9.2 The ability of the firm to cover short term debts without the need to sell stock. Written as a decimal. The higher the better.
- 3. Question Using the ratios, analyze the profitability and financial stability of the business Recommendations should be made to help improve the business’s performance. Expected Response 300 words