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Accounting Ratios

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  • Why is the bank manager interested in the company's financial statement?
    to check whether repayments of loan and interest be made on time
  • State the purpose of calculating the collection period for trade receivables.
    To see the average time the trade receivables take to pay their accounts.
  • calculate gross profit margin
    22.75%
  • calculate profit margin
    9.35
  • Calculate current ratio
    1.46 : 1
  • State the formula for ROCE
    Profit / capital employed
  • State the formula for trade payable payment period
    Trade payables/credit purchases x 365
  • State the formula for quick ratio
    CA-inv /CL
  • Suggest one way to increase company's working capital.
    increase profits / reduce drawings (any acceptable answer)
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