CH26 :Analysis of accounts - Coggle Diagram
CH26 :Analysis of accounts
Users of business accounts
Managers use them for taking decisions
Shareholders, creditors, government use them to check on compnay performance.
Other companies use them for comparing performance
Managers urse them for controlling the operations of a business
Its useful to compare the performance of a business with other businesses and previous years.
Gross Profit margin
Formula = Gross profit / revenue x 100
Acid test ratio
Formula = Current assets - Inventories / current liabilities
Formula = Current assets / Current liabilities
Net profit Margin
Formula = Net profit / revenue x 100
Return on capital employed
Formula = Net profit / Capital employed x 100
Might not help analyze the performance of a business in the future
Only external users can use published accounts.
Other companies may use different method of accounting which makes comparison hard to analyze