Accounting ratios help

Original post by 3213

Hi does anyone know how to work out
Gross Profit Margin, Operating Profit Margin, ROCE, Current Ratio, Acid Test Ratio etc

It's usually straightforward. What do you specifically have problems with?

Reply 2

Original post by 3213

I don't understand the financial statement to work them out

You more or less have to understand the financial statements in order to understand what the ratios are about. I can go over each part of the financial statements, but it would end up being a very long essay. Instead, I can point you to sources to understand the statements better. If not, I would recommend reading through the material provided to you on financial statements again.
Alternatively, if you have specific questions on each area of the financial statements, I can give you pointers and explain things better.

To compute the actual financial ratios, you would just need to find the numbers from the financial statements and then plug them into the ratios. This part should be straightforward. Sometimes though, you will get financial statements where each part of the financial statements is referred to and is defined as somethign else completely (oftentimes unnecessarily complicating the financial statements). Sometimes, what you are looking for is called something else in the financial statements, so you would ened to understand what each part of the financial statement is so you can figure out what you are looking for irrespective of what it's called. For example, an income statement is a profit and loss, and a statement of financial position is a balance sheet.

For your study purposes, the headings should be the same as you would need for the financial ratios (examiners don't try to complicate definitions unnecessarily). It will often require some time to get used to what each part of the financial statements mean, but once you get it it's pretty straightforward.

Reply 3

Original post by 3213

This is the question

Should have said it's university level work.

The headings used are pretty consistent with what you get for financial ratios i.e. you can plug in the numbers extracted from the document into your ratio calculations. This is relatively straightforward.
You will require a blend of ratios, each for different purposes and measuring each aspect of the business. It's pretty straightforward and out of the textbook.

The question is to ask you to do a financial analysis and compare the "current year's" performance to "the previous year's".

I am not sure how you want to lay out the Balanced Scorecard, but I would go by what they have taught you. You should find all your answers in your lecture notes regarding the scorecard.

Without doing the work for you, it's going to be difficult to give specific pointers. If you have specific questions about how you should go about this, I can give you pointers. However, I cannot directly give you the answers.

I do appreciate that a lot of the accounting textbooks are very badly written (especially those for financial accounting). If you want me to point you to resources that can explain concepts and the material better. Feel free to ask.

Reply 4

3213

OP

4

Original post by MindMax2000

Should have said it's university level work.

The headings used are pretty consistent with what you get for financial ratios i.e. you can plug in the numbers extracted from the document into your ratio calculations. This is relatively straightforward.
You will require a blend of ratios, each for different purposes and measuring each aspect of the business. It's pretty straightforward and out of the textbook.

The question is to ask you to do a financial analysis and compare the "current year's" performance to "the previous year's".

I am not sure how you want to lay out the Balanced Scorecard, but I would go by what they have taught you. You should find all your answers in your lecture notes regarding the scorecard.

Without doing the work for you, it's going to be difficult to give specific pointers. If you have specific questions about how you should go about this, I can give you pointers. However, I cannot directly give you the answers.

I do appreciate that a lot of the accounting textbooks are very badly written (especially those for financial accounting). If you want me to point you to resources that can explain concepts and the material better. Feel free to ask.

What is the capital employed ?

Reply 5