VCE Accounting Unit 4

1. 22.5
TYPES OF
ANALYTICAL RATIOS

2. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
 Analytical ratios are used to analyse and interpret the following 4
areas of the business:
22.5 TYPES OF ANALYTICAL
RATIOS
Profitability ratios
Analyse how profitable the firm has been during the reporting
period relative to a base figure, e.g. sales, assets, owner’s equity
Operating efficiency ratios
Analyse how efficiently management has used the assets of the
business (e.g. stock, debtors, current assets.)
Liquidity ratios
Analyse the ability of the business to meet its short-term debts as
they fall due.
Stability ratios
Analyse the financial stability and level of financial risk being
taken on by the business.

3. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TYPES OF ANALYTICAL RATIOS
This indicator measures…
Financial Indicator Profitability Efficiency Liquidity Stability
Gross Profit Margin

Net Profit Margin

Return on Assets (ROA)
 
Return on Owner’s
Investment (ROI) 
Asset Turnover
 
Stock Turnover
 
Debtors Turnover
 
Creditors Turnover
 
Working Capital Ratio

Quick Asset Ratio

Cash Flow Ratio

Debt Ratio (Gearing)
  

4. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TYPES OF ANALYTICAL RATIOS
 From the VCAA Study Design…
 On the Exam:
 You are expected to know how indicators are calculated
 But you are not required to make the calculations

5. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TASK
In-class Homework
Extension Question 1 X