Topics: Debt, Generally Accepted Accounting Principles, Creditor Pages: 3 (555 words) Published: May 22, 2013
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P5-Perform ratio analysis to measure the profitability, liquidity and efficiency of a given organisation. -------------------------------------------------
M2-Analyse the performance of a business using suitable ratios. In this task I am going to perform ratio analysis and measure the profitability and efficiency of SIGNature and analyse the performance of their business using suitable ratios Profitability Ratios -Gross profit margin

Gross profit X 100 = 298935 X 100 = 57.30%
Sales 521700

Every £1 of sales the percentage is the amount of pence that becomes the gross profit. This will be 57.3p in gross profit. This method to measure performance ability is not always reliable as the calculation for NP margin, as a business will not just have stock and materials to take in. Net profit (after appropriations) X 100 = 44160 =8.46%

Sales 521700 Net profit margin

A business would use every £1 of sale to re-invest or after appropriations. This figure is neither good nor bad for the SIGNature ltd. Im not sure about this figure, with th0d Returned on capital employed

Net profit (after appropriations) X 100 = 44160 = 29.61%
Capital employed 149160

This figure shows you how much money will be returned back into the business depending on how much they have invested. Not investing money into the business means you will not be making profit. I am not sure if 29.61% is a good figure but it must be a good figure if the capital employed is £149,160. Maybe if the percentage is higher they employ more capital and they can re-invest more.

Liquidity ratios-Current ratio
Current assets: 1 = 70160 = 4.53:1
Current liabilities 15500

Every £1 that they owe they own £4.53 worth of assets. For SIGNature ltd the ratio is good, meaning not too much stock or...