# ~P5 Unit 2 Pejp

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P5 Perform ratio analysis to measure the profitability, liquidity and efficiency of a given organisation. Write an introductory paragraph saying you are going to do ratio analysis for Hot Fashions. Then say briefly what ratio analysis is and what it is used for (use Google or text book). Then start doing these 8 ratios: PROFITABILITY 1. GROSS PROFIT RATIO GROSS PROFIT/SALES X 100 = % Leave the formula in. Now add in the figures from the Income Statement or Balance sheet and calculate the ratio. Then describe what this ratio shows and explain what it means. Hint: Use Google or a text book to look for an explanation of each ratio. 2. NET PROFIT RATIO NET PROFIT/SALES X 100 = % (NB use net profit figure before tax has been taken out) Leave the formula in. Now add in the figures from the Income Statement or Balance sheet and calculate the ratio. Then describe what this ratio shows and explain what it means. 3. RETURN ON CAPITAL EMPLOYED (ROCE) NET PROFIT/CAPITAL EMPLOYED X 100 = % (NB use net profit figure before tax has been taken out) (For capital employed see Financed By total on Balance Sheet) Leave the formula in. Now add in the figures from the Income Statement or Balance sheet and calculate the ratio. Then describe what this ratio shows and explain what it means. LIQUIDITY 4. CURRENT RATIO CURRENT ASSETS/CURRENT LIABILITIES = X : 1 Leave the formula in. Now add in the figures from the Income Statement or Balance sheet and calculate the ratio. Then describe what this ratio shows and explain what it means. 5. ACID TEST RATIO CURRENT ASSETS MINUS STOCK/CURRENT LIABILITIES = X : 1 Leave the formula in. Now add in the figures from the Income Statement or Balance sheet and calculate the ratio. Then describe what this ratio shows and explain what it means. ACTIVITY 6. STOCK TURNOVER RATIO COSTS OF GOODS SOLD/AVERAGE