Unit 2 M3 Business Resources

Topics: Generally Accepted Accounting Principles, Asset, Balance sheet Pages: 2 (1255 words) Published: April 23, 2015
Interpret the contents of a trading and profit and loss account and balance sheet for a selected company explaining how accounting ratios can be used to monitor the financial performance of the organisation. Introduction

In order to help Ania compare her achievement through financial methods such as ratio analysis she has managed to obtain some data from her competitor which is called “Polish Cuisine Imports”. They are a direct competitor to Polish Fine Foods as they are also wholesale business importing foods, drinks and other products from Poland and selling them to small retailers. The financial information that Ania collected is as follows: Polish Fine Foods

Polish Cuisine Imports

Solvency Ratios
Current Ratio



Acid Test


Profitability Ratios
Gross Profit Margin


Net Profit Margin


Return on Capital Employed

Performance Ratios
Stock Turnover
31 days
42 days
11 days

Debtors Collection Period
45 days
49 days
4 days

Asset Turnover

In the table above, I’ve also included the column with the difference between the ratios of Polish Fine Foods and Polish Cuisine Imports in order to make it easier to compare them. In order for Ania to be able to monitor her financial performance using ratio analysis, she needs to understand the ratios she has produced in a context. The context either needs to be in relation to ratio analysis conducted previously and collected over a period of time and this usually takes years; or it can be done in comparison with a direct competitor of Ania. So, in this assignment I’m going to analyse Ania’s ratios using data from the table which are the ratios for Polish Cuisine Imports. Solvency Ratio Analysis

Current ratio is the first solvency ratio that I’m going to use. The current ratio measures a company’s current assets against its current liabilities. The current ratio...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Unit 2 Mock Assignment P5 P7 M3 D2 Essay
  • Essay about Btec Business Level 3 Unit 2 Business Resources M2
  • Unit 2 Business Resources Essay
  • Unit 2 Business Resources Essay
  • Essay about Unit 2 P7 M3
  • Essay on Unit 2 Business Betc
  • p5 unit 2 business Essay
  • Essay about Unit 2 P7

Become a StudyMode Member

Sign Up - It's Free