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Need HELP BTEC Business Unit 2 D2 watch

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    Profitability
    · What arethe benefits of using profitability ratios?· What arethe drawbacks of using profitability ratios?· Do profitability ratios take into account thechanging costs of materials?· Do profitability ratios take into accounteconomies of scale?· Do profitability ratios take into account theexternal environment and the impact it might have? Liquidity· What arethe benefits of using liquidity ratios?· What arethe drawbacks of using liquidity ratios?· Do liquidity ratios take into account the truevalue of assets?· Do they take into account changes inliabilities, e.g. what happens if there is a change in interest rates. E.g. ifinterest rates go up, the company might have to pay more interest on borrowing suchas bank loans.EfficiencyRatios· What arethe benefits of using efficiency ratios?· What arethe drawbacks of using efficiency ratios?· Do these ratios take into account how well thebusiness is being managed? E.g. are the managers running the business well, areresources being used efficiently.Generalinadequacies of ratios· Don’t compare against other business· Don’t take into account the change in theexternal environment e.g. recession or boom, how might this affect a business· Don’t tell you why things happen, what are thereasons behind this.· Based on book value – what the assets arevalued at on the balance sheet· Does not take into account the management orquality of staff

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Updated: November 13, 2015
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Do I go to The Streets tomorrow night?

The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

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