Introduction to ratio analysis

Overview

The course will cover some of the key ratios that are used to assess and interpret as set of accounts. The ratios will be demonstrated using accounts of a number of companies.

The ratios include:

  • Profitability – gross profit margin, operating profit margin
  • Liquidity and solvency – current ratio, quick (or acid text) ratio, gearing, interest cover, trade receivable days, trade payable days and inventory days
  • Efficiency ratios – return on capital employed, return on shareholders’ funds, net asset turnover
  • Investor ratios – earnings per share, dividend yield, dividend cover, price earnings ratio
  • Cash flow ratios – cash return on capital employed, operating cash to operating profit

Learning Outcomes

By completing this course you will be able to: 

  • Understand the use of ratios to provide detailed analysis of financial statements recognising the differing needs of various users of the accounts
  • Identify the ratios that would be useful to provide additional analysis of specific areas of the financial statements
  • Understand the use of ratios to analyse liquidity and cash balances
  • Calculate ratios including Return on Capital Employed (ROCE), Current Ratios, Working Capital ratios

 

Authored by: Gemma Rudrum

Gemma Rudrum qualified as a chartered accountant with Ernst & Young in 2004, working in their Assurance and Advisory team. She joined BPP in 2007 as a tutor teaching financial reporting and auditing subjects. She has also worked in our Learning Media team designing and developing content and is now our Head of Work Based Learning and runs our PGCert programme.

CPD Points: 1

CPD Duration (hours): 1

Access: 12 months from purchase date

Price: £30.00 (excludes VAT)
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