Gross profit/cost of sales %

It represents the estimated amounts that can be collected from credit customers

Total assets less total liabilities ie same as capital

It measures the ability of a business to generate enough income to cover its expenses

1. Business was able to sell more goods (e.g add more stores) 2. Business was able to sell goods at a higher price (e.g. increased demand)

Gross profit / Net sales revenue The denominator is NOT sales revenue

1. Ability of the business to sell goods at a higher price (due to higher demand and lesser competition) 2. Ability of the business to buy goods at a lower cost (due to getting goods from a cheaper supplier)

The amount of profit earned for every dollar of equity invested in the business (profit/0.5 x(beg capital+end capital)

1. sell goods at higher price 2. buy goods from a cheaper supplier (bring inventory cost lower) 3. find ways to lower expenses e.g. moving to a place of lower rent.

Ability of a business to repay its current liabilities when they are due.

Poor liquidity results in business :1. unable to buy goods on credit, so less goods for customers 2. unable to enjoy trade discount, so higher cost of sales 2. unable to pay for daily expenses, e.g. salaries, rent 3. Unable to enjoy cash discount to save cost of inventory. 4. Can't afford to sell on credit so may lose customers to others who can

Liquid assets are not profit-generating while many NCA can help produce goods for sale. So resources not helping to maximize profit

1. Working capital 2. Current ratio 3. Quick ratio. 4. What do the ratio means 5. what cause the changes in the ratios. 6. compare with generally accepted healthy ratios 2:1 for Current ratio, 1:1 for quick ratio

1. GPM 2. PM 3. % of expense to NSR 4, what the ratios mean ? 5. Why ratio change.

Current assets / Current liabilities