Business Level 3
Unit 4 – Business accounting
Know Your Ratios
Businesses need to be able to analyse their financial performance; this is usually done using a
range of ratios that give an indication of how well a particular business has performed.
Task 1
The main ratios that businesses use to assess their profitability, liquidity and efficiency are provided
below. Some of the terms have not yet been added – complete the shaded boxes using the terms
on the next page to complete the formulae correctly.
Profitability Ratios:
Gross Profit
Gross Profit Margin =
Net Profit Margin =
x
100
x
100
x
100
Turnover
Net Profit before tax
Return on Capital Employed =
Liquidity Ratios:
Current Assets
=
Current Liabilities
Current Assets Acid Test Ratio =
Current Liabilities
Business Level 3
Efficiency Ratios:
Debtor Collection Period =
x
365
x
365
x
365
Turnover
Creditors
Creditor Payment Period =
Stocks
=
Missing Terms
Turnover
Debtors
Net Profit
Stock Turnover
Stock
Capital Employed
Cost of Sales
Current Ratio
Turnover
You have 10 minutes to complete this task.
Business Level 3
Task 2
The main ratios that businesses use to assess their profitability, liquidity and efficiency are provided
below. Cut the cards out below and use them to complete the formulae correctly.
Gross Profit
Return on Capital Employed =
x
100
x
100
x
100
x
365
x
365
x
365
Turnover
Net Profit
Acid Test Ratio =
Creditor Payment Period =
Turnover
Net Profit before tax
Capital Employed
Stock Turnover =
Current Assets
Current Liabilities
Current Assets - Stock
Net Profit Margin =
Current Liabilities
Debtors
Gross Profit Margin =
Turnover
Debtor Collection Period =
Creditors
Turnover
Stocks
Current Ratio =
Cost of Sales
You have 10 minutes to complete this task.
These activities offer an opportunity for English skills development.