Accounting Process Financial transaction- passing journal entry - prepare ledger account Trial balance- two columns Manufacturing A/C - cost of production.

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Presentation transcript:

Accounting Process Financial transaction- passing journal entry - prepare ledger account Trial balance- two columns Manufacturing A/C - cost of production Trading A/C - gross profit Profit & Loss A/C Profit & Loss adjustment A/C

Profitability ratios Return on capital employed (ROCE) (the primary ratio) (Secondary ratios) Profit before interest and tax/capital employed Net profit/Sales Gross Profit/Sales

Ratios showing utilisation of resources Sales/capital employed Sales/Total assets Sales/non-current assets Sales/Current assets

Financial ratios Current ratio (current assets/current liabilities) Liquidity ratio (current assets-inventory/ current liabilities) Inventory turnover (cost of sales/average inventory) Trade Receivables collection period(Trade receivables*365/credit sales) Trade Payables payment period(Trade payables*365/credit purchases)

Investment ratios Gearing (fixed cost capital/total capital) Debt/equity ratio (fixed cost capital/equity) Interest cover Earnings per share Price earnings ratio (PER) Dividend cover Dividend yield

Najim Sole Trading For The Years Ended 31 Dec 2011 and 31 Dec 2010 Gross profit percentage: Gross Profit / Sales * ,308 / 172,308 = 35.00% ,000 / 187,500 = 32.00% Net profit percentage : Net Profit / Sales * ,539 / 172,308 = 12.50% ,322 / 187,500 = 14.57%