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Financial ratios
Ratio analysis and Financial Performance
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Slide 1:
Slide
Tourism
Foundation Degree
This lesson contains
24 slides
, with
interactive quizzes
,
text slides
and
1 video
.
Lesson duration is:
180 min
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Items in this lesson
Ratio analysis and Financial Performance
Slide 1 - Slide
Lesson objectives
• Describe the purpose of financial ratios
• Describe how to calculate eight financial ratios
• Explain the financial position of easyJet
Carry out eight calculations
First though.....recap on balance sheets
Slide 2 - Slide
A balance sheet contains......
A
Current assets
B
Non current assets
C
Current liabilities
D
Non current liabilities
Slide 3 - Quiz
Buildings and machinery would be....
A
Current asset
B
Non current asset
C
Current liability
D
Non current liability
Slide 4 - Quiz
Which are current assets?
A
Stock
B
Cash
C
Vehicles
D
Computers
Slide 5 - Quiz
Which are non current liabilities?
A
Mortgage
B
Overdraft
C
Bank loan (10 years)
D
Creditors
Slide 6 - Quiz
Slide 7 - Video
How do you feel about ratio analysis?
😒
🙁
😐
🙂
😃
Slide 8 - Poll
Have you studied ratio analysis before?
Yes
No
Slide 9 - Poll
Ratio analysis is used to
interpret
the financial information contained within the income statement and the Statement of Financial Position
Slide 10 - Slide
What are ratios?
Ratios are figures which express the key relationships in a set of accounts by comparing one figure with another.
Slide 11 - Slide
Ratio analysis is used to:
- Assess the organisation's financial performance
- Evaluate the financial stability of the organisation
- Predict the future performance and stability of the organisation
Slide 12 - Slide
What benefits would comparing ratios over two years give the company?
Slide 13 - Open question
What external factors impact on a business but are not identified through ratio analysis?
Slide 14 - Mind map
www.macrotrends.net
Slide 15 - Link
Three types of ratio for you to learn
Profitability
Performance
Liquidity
Slide 16 - Slide
Profitability - These ratios reveal a company’s ability to generate profits.
Ratio
Method of calculation
Gross Profit Margin (%) Gross profit x 100 / sales
Net profit Margin (%) Net profit x 100 / sales
Return of Capital Employed (%) Net profit x 100 / capital employed
Slide 17 - Slide
Apply / Practice
Slide 18 - Slide
Liquidity - These ratios assess a company’s ability to meet its short-term debts.
Ratio
Method of calculation
Current ratio Current assets : current liabilities
Optimum value - 1:8
Acid test Current assets –
closing stock
: current liabilities
Optimum value - 0:8
Slide 19 - Slide
Apply / Practice
Slide 20 - Slide
Performance - These ratios assess how efficiently a company utilises its assets
Ratio
Method of calculation
Stock turnover
Average
stock/Cost of sales x 365
(days)
Debtor collection period Debtors x 365 / sales
(days)
ideal (30 days)
Creditors payment period Creditors x 365 / cost of sales
(days)
(40-50 days)
Slide 21 - Slide
Apply / Practice
Slide 22 - Slide
Now how do you feel about ratio analysis?
😒
🙁
😐
🙂
😃
Slide 23 - Poll
Plan for next week
Slide 24 - Slide