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Profitability & liquidity ratio analysis (liquidity ratios (strategies…
Profitability & liquidity ratio analysis
liquidity ratios
current ratio
current assets/current liabilities
acid test ratio
liquid assets/current liabilities
strategies for improving
sell of inventories
increase loans
sell off fixed assets
profitability ratios
profit margin ratios
strategies to improve
increasing price
reducing overhead cost
reducing direct cost
return on capital employed (ROCE)
percentage; (net profit/capital employed) x 100
strategies for increasing ROCE
increase net profit without increasing capital employed
reduce variable cost per unit
reduce overheads
innovate products, set $ high
increase capital invested in new technology
raise $ of products
reduce capital employed
sell asset that contribute little
use capital raised to reduce debts
net profit margin (%)
(net profit/sales revenue) x 100
gross profit margin (%)
(gross profit/sales revenue) x 100
liquid assets
current assets - inventories