Ratio Analysis

At the end of the lesson :

Prepare an oral presentation:

1. Explain the term  ratio analysis;

2. Discuss two uses and two limitations of ratio analysis;

3. Who are the users of such information and why?

4. Analyze the four  basic type of ratios

Profitability ratios:
1. Return on Capital Employed (ROCE)
2. Gross Profit Margin (GPM)
3. Net Profit Margin (NPM)

Liquidity ratios:
1. Current ratio
2. Quick ratio (Acid test ratio)

Efficiency ratios:
1. Asset Turnover
2. Inventory Turnover
3. Debtor’s Days
4. Creditor’s Days 

Solvency ratios:

1. Total-Debt-to-Total-Assets
2. Debt-to-Equity
3. Interest-Coverage Ratios