5.5 Analysis of Accounts

• 5.5.1 Profitability
• concept of profitability
• calculate and interpret the following profitability ratios:
  – gross profit margin
  – profit margin
  – return on capital employed (ROCE)
  5.5.2 Liquidity
• concept of liquidity
• calculate and interpret the following liquidity ratios:
  – current ratio
  – acid test ratio
  5.5.3 Users of accounts
• users of accounts and ratio analysis: internal, e.g. owners (sole traders, partnerships,
  shareholders), managers, employees
• users of accounts and ratio analysis: external, e.g. suppliers, government, lenders/banks
• how users of accounts may use financial information to help make decisions, e.g. whether to lend
  to or invest in a business
• limitations of using accounts and ratio analysis

Minimum Time = 35 minutes