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• Many people inside/outside a company want to know if the company is performing well, and compare it to other years as well as to other companies.
There are two forms of doing this
To understand these terms, there is need to verify each meaning
 Net profit Before tax is found on the Profit and Loss Account, it is calculated by
=
Profit before tax Revenue (Minus) All costs
 Net Assets employed is found on the balance sheet us calculated by
=
Net assets employed Total assets (Minus) Total Liabilities
By knowing this the formula is then used The percentage shows how well the management of the business have used the assets employed in the business to generate money, this is compare with other years and companies, to see their progress. If the % is larger than the year before it is an improvement if there is a lower % the company is deterioration. A normal increase I would consider more a company is between 5-10% increase since it is enough growth, if it exceed this percentage the government takes action, because their profit is too large and may be exploiting their employees.
The other way to see whether the company is on the right track is
This is called the Profit Margin
The figures show the percentage of profit in each dollar of sale. It is usually called the mark up ratio; this will be compare with other years and companies, to see their progress. If there is a larger % than their companies it shows an improvement in their profit. If the company is from 7% higher than their competitors in my company is a great success.
• This is an important question, especially to creditors like banks.
To understand this, it is needed to check the terms used
 Current assets are Cash or short term uses of finance that a business can turn into cash.
Such as stock.
 Current liabilities is what the business owes, but at short terms.
Such as overdraft or money owed to creditors.
• The ratio that was shown after the formula shows how well the business is able to meet short term debts from its current assets. It is good to note that to be able to keep on operating the current ratio has to be larger than one (1).
This is a more specific way in which the company can show the way of looking how well a business can pay the debts. Stocks are taken out of the current assets because the business may not be able to sell them quickly or at the right price. The normal Acid test ratio is between 0.5 and 1.
This is the question most interested Shareholders are asking themselves, to see if they have an opportunity to gain any profit from the dividends.
Two types of Ratios may be used
This shows how successful the management of the business has used the money the money invested by shareholders. Return of 15-0% is reasonable during a period of economic recession.
Another type is Gearing
Both of this figures are found on the Balance sheet, the percentage shows how much of all the company's capital is owed. If a high percentage is owed, the company is growing faster, however it is more risky due to the fact that if they are not able to repay it, it may lead to bankruptcy. Or if there is a low percentage the company is growing fairly slow but securely. It is normal to have a gearing of 10-0% to be a normal growth if it is exceed to 0-40% , to be a more risky gearing.
(High Load Capital) = (High Risky Growth) And inversed…
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