1. Gabrielle Moran 11th September 2010 Ratio Analysis

2. Around Christmas in 6th Year– depending?

3. Why prepare accounts at all? Ascertain profit Measure performance Other people

4. Users Shareholders/Owners Employees Suppliers Revenue Commissioners Managers Lenders Competitors

5. 5 aspects Profitability and efficiency Liquidity/Solvency Working Capital Gearing Investment

6. Cross Reference Grid Users vs Aspect Why and what looking for

7. Each Ratio How to calculate (formula) What it tells us Expected trends/norms Compare with/ Relate to others?

8. © 2008

9. Profitability /Efficiency Liquidity/ Solvency Gearing Investment Working Capital Why? What? Lenders Potential Shareholders ShareholdersManagementCustomers © 2008

10. Formula 2 : 1 Expected Norms Acid Test Relate to Investment Ability to pay ST debts What it shows CA CL Working Capital © 2008

11. Three dimensions to topic Calculating – Murphy Interpretation – AAA, BB Definitions – Little Book

12. General approach to part b Calculate & recalculate if appropriate Figures given from previous year – Be Aware Comment on Trend Norms Relation to other ratios Relation to interest rates Sector

13. Part C Don’t forget!!! Mini part B – giving advice opportunity to buy share To company Discuss rising liquidity ratio is a sign of prudent management Gross profit % changing explain

14. Methods for learning formulae  Daily test -- immunity  Dominos  Follow me  Bingo  Little Booklet (pass definitions)

15. Methods for tackling part (b)  Place mat  Tri Pie  Cross ref chart

16. Follow me ….

17. Current Ratio Start Card Who has ……

18. Creditors Days (Average period of credit received) Current Assets Current Liabilities

19. Dividend Yield Trade Creditors X 12 (or 365) Credit Purchases

20. Debt/Total Capital Percentage Dividend per Share Market Price per Share X 100

21. Gross Margin Debt Capital Total Capital X 100

22. DPS Dividend per share Gross Profit Sales X 100

23. Return on Shareholders Funds Total Ordinary Dividend Number of issued ordinary shares

24. Profit (after tax and preference divs) Ordinary Shares plus reserves Debt/Equity Ratio X 100

25. Price Dividend Ratio Debt Capital : Equity Capital

26. Net Margin Market Price per Share Dividend per Share

27. Acid Test Net Profit before interest and tax Sales X 100

28. P/E Ratio Current Assets – C. Stock Current Liabilities

29. Stock Turnover Market Price per Share EPS (Earnings per share)

30. Fixed Asset Turnover Cost of Sales Average Stock ( ) (OS + CS) 2

31. Dividend Cover Sales Fixed Assets

32. Return on Capital Employed (RoCE) Profit (after tax and preference dividends) Total Ordinary Dividend

33. Mark-Up Profit before interest and tax Shareholders Funds + LT Liabilities X 100

34. Debtors Days (Average period of credit Allowed) Gross Profit Cost of Sales X 100

35. Interest Cover Trade Debtors X 12 (or 365) Credit Sales

36. Earnings Per Share (EPS) Operating Profit Interest Charges

37. Profit (after tax and preference dividends) Number of Issued Ordinary Shares I Have …… End Card

38. Sequence 1. Current Ratio 2. Creditors Days 3. Dividend Yield 4. Debt/Total Capital % 5. Gross Margin 6. DPS 7. Return on Shareholder Funds 8. Debt/Equity Ratio 9. Price Dividend Ratio 10. Net Margin 11. Acid Test 12. P/E Ratio 13. Stock Turnover 14. Fixed Asset Turnover 15. Dividend Cover 16. Return on Capital Employed (RoCE) 17. Mark-Up 18. Debtors Days 19. Interest Cover 20. Earnings Per Share

39. Dominos ….

42. Bingo  Students - Draw 3x3 grid  Teacher – List 15 terms on board  Students - select 9 terms and create bingo card  Teacher – read out definition of terms  Students – cross out the appropriate terms when they match the definitions

43. Place Mat

44. Draw the rectangle and 4 lines as shown Each member of the group answers the question in their own section Permission to scout ‘No 1’ reads their list – others tick or add as appropriate Place Mat

45. Permission to scout Individually select the most important/relevant differences in your school No 2 writes no 1’s main difference into the centre box; No 3 writes no 2’s etc. or group arrives at consensus as to the most important points Place Mat

46. Agree on main points

47. © 2008 No Yes Perhaps