Performance Ratio Analysis: Information Pack
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Introduction
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The objective of this simulation is to illustrate how to calculate and interpret a selection of business performance ratios. The business ratios under consideration include the current ratio, the acid test ratio and the gearing ratio.
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Background
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Business performance ratios are commonly used when people try to assess how the business is performing. The ratios can be subdivided into the following groups:
- Performance ratios, these include profit, capital employed and turnover.
- Liquidity ratios, concerned with the short term financial position of the company.
- Gearing ratios, focus on the long term financial position of the company.
- Shareholder ratios, concerned with the return for the shareholder.
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The Model
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You can download an Excel version of the original spreadsheet (Excel 97).
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The Model Settings
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The model settings for the inputs are:
Long term assets
- Tangible assets (£): 1000 to 12000
- Investments (£): 0 to 1000
Current assets
- Stocks (£): 17500 to 19500
- Debtors (£): 10000 to 15000
- Cash at Bank (£): 6000 to 8000
Current liabilities
- Amounts falling WITHIN ONE year (£): 18000 to 26000
Long term liabilities
- Amount falling AFTER ONE year (£): 2000 to 3000
- Provision for liabilities and charges (£): 500 to 2000
- Deferred income (£) 0 to 1000
Loan and share capital
- Loan capital (£): 2000 to 3000
- Preference Share Capital (£) 0 to 4000
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Navigation
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