Financial ratios

Ratio analysis and Financial Performance 
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TourismFoundation Degree

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Ratio analysis and Financial Performance 

Slide 1 - Diapositive

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 - Diapositive

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 - Vidéo

How do you feel about ratio analysis?
😒🙁😐🙂😃

Slide 8 - Sondage

Have you studied ratio analysis before?
Yes
No

Slide 9 - Sondage

Ratio analysis is used to interpret the financial information contained within the income statement and the Statement of Financial Position 

Slide 10 - Diapositive

What are ratios?
Ratios are figures which express the key relationships in a set of accounts by comparing one figure with another.

Slide 11 - Diapositive

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 - Diapositive

What benefits would comparing ratios over two years give the company?

Slide 13 - Question ouverte

What external factors impact on a business but are not identified through ratio analysis?

Slide 14 - Carte mentale

Slide 15 - Lien

Three types of ratio for you to learn 

Profitability 
Performance 
Liquidity 

Slide 16 - Diapositive

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 - Diapositive

Apply / Practice 

Slide 18 - Diapositive

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 - Diapositive

Apply / Practice 

Slide 20 - Diapositive

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 - Diapositive

Apply / Practice 

Slide 22 - Diapositive

Now how do you feel about ratio analysis?
😒🙁😐🙂😃

Slide 23 - Sondage

Plan for next week

Slide 24 - Diapositive