1. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning

2. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Performance ratios - assess the relative success of the business Liquidity ratios - assess the extent to which assets cover business liabilities Efficiency ratios - assess the management and utilisation of assets Investor ratios - assess items of particular interest to investors Lending ratios - assess financing relationships

3. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Example: Bilton Burgess plc

4. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Example: Bilton Burgess plc

5. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Return on capital employed (ROCE) –Pre-tax ROCE

6. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Return on capital employed (ROCE) –Return on total investment

7. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Current ratio

8. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Quick (acid test) ratio

9. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Fixed asset turnover ratio

10. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Stock turnover

11. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Stock turnover in days

12. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Debtors turnover ratio

13. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Creditors turnover ratio

14. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Dividend per share

15. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Dividend cover

16. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Earnings per share

17. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Price/earnings ratio (P/E ratio)

18. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Price/earnings ratio (P/E ratio) - comparison –Bilton Burgess plc: 13.1 –Abacus Casement plc: 18.4 –Carew Grapeshot plc: 10.3 P/E measures the market’s perception of a company’s shares Higher P/E - shares more highly regarded, perhaps less risky Lower P/E - shares may be more risky

19. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning P/E ratios - more examples Examples of P/E ratios of companies listed on the London Stock Exchange CompanyP/E Boots15.6 Dixons18.6 Marks & Spencer19.2 Ted Baker24.7

20. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Gearing

21. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Gearing (alternative calculation)

22. Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN 1-84480-200-0 © 2005 Thomson Learning Interest cover