Ratio Analysis Introduction to Business Accounting Week 4 Ratio Analysis – What is it? Ratios are Mathematical formulae that simplify financial information for the non-financial specialist whose responsibility is to understand, analyse, and act upon reported financial information
Introduction to Business Accounting
Average stock held (or closing stock)
Net profit before interest and tax X 100
Share capital + reserves + long term loans
A ratio that indicates the efficiency and profitability of a company's capital investments.
ROCE should always be higher than the rate that the company borrows at, otherwise any increase in borrowings will reduce shareholders' earnings