AccountingCode 7707
Interpretation of accounting ratios
What this topic asks you to be able to do
- how to draw up statements that compare one year's results with another's, and how to comment on them
- the way to interpret the ratios that were calculated in 6.1
- make proposals and recommendations on how profitability, liquidity and working capital could be improved
- the gross profit margin and the profit margin as signs of how profitable a business is
- how the valuation of inventory, the quantity of sales, and shifts in selling and purchasing prices can influence gross profit for the year
- how movements in gross profit, other income and expenses can shift the profit for the year
- why a business's cash and its profit differ