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  • What are the two liquidity ratios.
    1) Current ratio, 2) Acid test ratio.
  • Formula of ROI
    Net profit/capital employed x 100
  • Formula of acid test ratio.
    (Current assets- closing stock): creditors falling due within 1 year
  • Explain the term debt/equity ratio.
    Debt = borrowed money. Equity= Investment from owners/shareholders.
  • Limitations of ratio analysis- Name two
    Changes to staffing, valuation of assets, changes in business environment, other economic variables.
  • Formula of current ratio.
    Current assets: Creditors falling due within 1 year
  • What are reserves?
    When a business has money left over at the end of the year.
  • Formula of GPM
    Gross profit/sales x 100
  • Formula of NPM
    Net profit/ sales x 100
  • Debt: Equity is also known as the ........ ratio.
    Gearing ratio
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