1. LO: To know what ratio analysis is and the different methods that can be used

2. What do you check for when buying new car?

3. You should check it’s performance Miles per gallon CO2 emissions PERFORMANCE! RATIOS HELP US CHECK BUSINESSES PERFORMANCE…

4. What is ratio analysis? Helps to draw conclusions about how well the business is doing Gives a more precise picture

5. 2 MAIN PERFORMANCE INDICATORS PROFITABILITY – Comparing revenue to costs LIQUIDITY (cash) Comparing assets to liabilities A.k.a – Working Capital

6. Profitability ratios Measure the performance of the business and focus on profit, turnover and investment Gross profit margin Gross profit x100 Sales Revenue Net profit margin Net profit x100 Sales Revenue Return on capital employed Net profit x100 Capital employed

7. Liquidity ratios Measure how easily the business can pay its debts and so how quickly things can be turned into cash Current ratio Current assets Current liabilities Acid test ratio Current assets - stock Current liabilities

8. Other ratios Gearing ratios – Compare the amount of share capital to the amount of loan capital Shareholders’ ratios – Measure the return to shareholders on their investment https://www.youtube.com/watch?v=TZZFBkbC2lA

9. Questions Why would investors perform ratio analysis What do liquidity ratios show What are the different types of ratio analysis What’s difference between net profit margin and ROCE? Explain another ratio that could be used?