(a) List the four main groups of accounting ratios (b) Identify accounting ratio which relates to each of the following statements i. a return of N10 net profit for every N100 invested ii. goods are held on average for a period of one month before they are sold iii. trade debtors on the average take a period of 33 days to settle their debts. iv. trade creditors on the average are paid within 44 days for credit purchases v. gross profit of N40 is made on every N100 of net sales vi. current assets are three times that of current liabilities vii. liquid assets are three times that of current liabilities. viii. for every N100 net turnover, N17 is made after deducting operational expenses. ix. profit covers interest payment9 times
Explanation
(a) Main Groups of Accounting Rations; i. Profitability Ratios/Performance Ratios ii. Liquidity ratios/Solvency Ratios iii. Efficiency Ratios/Asset/Activity Ratios iv. Capital Structure Ratios/Gearing ratios/Leverage v. Security Ratios/Investor Ratios/ Shareholder Ratios (b) i. Net Profit Margin; Net Profit Ratio; Net Profit Percentage; Net Profit to Sales Ratio or Net Profit: Sales. ii. Stock turnover; Inventories days; Stock turn or Turnover of Stock. iii. Debtor days; Receivables days; Average Collection Period; or Debtors Collection Period iv. Creditor's days; Payables days; Average Payment Period or Creditors Payment Period v. Gross Profit Margin; Gross Profit Percentage Gross Profit to Sales Ratio or Gross Profit: Sales. vi. Current Ratio or Working Capital Ratio vii. Quick Ratio or Acid-Test Ratio. viii. Return on Capital Employed or Profit Margin ix. Interest Cover.
