This ratio measures how long it takes debtors to pay on average. 5 8. Creditors’ Payment period Creditors Credit purchases measures how long it takes the business to pay its debts.

Recap What are accounting ratios? Performance measurement – key issue for every equines 6 Surprise Meats look to expand. Malcolm Surprise is a sole trader who runs a small wholesale butchery business supplying local retailers with lamb, beef and pork. Recently, he has been getting produce is top quality at competitive prices.If he is to expand and take on more customers, he will need additional capital expenditure of around El 50,000 to finance the growth of his business. Balance Sheet Surprise Meats as at 01 January 2011 Fixed Assets Warehouse Fixtures and fittings Van 130000 55 500 12800 198 300 Current Assets Stocks 20 oho 18720 Cash in bank 36 400 75 120 Current liabilities Trade creditors 9 400 Loan 15000 44 400 Net Current assets (Working capital) 30 720 229 020 Financed by: Opening capital 190000 Add Net Profit 65 020 255 020 Less Drawings 26 oho Capital employed SST Albany R.

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C. High School BITE Level 3 Nationals in Business Assignment front sheet – Unit 5 Business Accounting Unit Code Assignment 4 Assessor name Learner name Mrs.. Christine Thomas Date issued Completion date Submitted on 20 May 2013 Qualification BITE Level 3 Subsidiary Diploma Unit 5 Business Accounting Assignment title The Purpose of accounts In this assessment you will have opportunities to provide evidence against the allowing criteria. Indicate the page numbers where the evidence can be found.Criteria reference To achieve the criteria the evidence must show that the student is able to: Perform ratio analysis to measure the profitability, liquidity and efficiency of a given organization.

Analyses the performance of a business using suitable ratios. Evaluate the financial performance and position of a business using ration analysis Task no. Learner declaration I certify that the work submitted for this assignment is my own and research sources Date: Page numbers Unit 5: Business Accounting Task 1Using the profit and loss account and balance sheet that you prepared for Sahara and Ryan perform ratio analysis to measure the profitability, liquidity and efficiency of the organization. Carry out the following ratios; Gross profit percentage Net profit percentage ROCK Current ratio Acid test ratio Debtors’ payment period Creditors’ payment period SIGNature-a new business manufacturing road signs For each calculation explain what each ratio is a measurement of, and what the result means to Sahara and Ryan.

Try to explain possible reasons for the ratio and the significance of it to the business’s overall performance.Task 2 Make a Judgment about each ratio-does it mean a good or poor performance? Explain why. MM guidance: you are being asked to ‘analyses’ Signature’s ratio’s. One structure that can help you with this is to consider ’cause’ and ‘effect’; Cause is what factors contributed to the outcome – e. G, the gross profit as a percentage of sales might be high/low because of the cost of materials o Effect is what this now means for the business – e.

G, what the creditors’ payment period would mean for the future cash flow of the business. Explain what each ratio measures, what the result means and then try to make a meaningful comment about this figure.Expressions such as this means that…..

… ‘ and therefore..

…. ‘ .

Can help you develop lines of analysis. Task 3 SIGNature Ltd Evaluate the overall performance of Sahara and Ryan’s first year of trading. DO grading tip: ‘evaluate’ means to make Justified Judgments. You should look at each ratio and consider whether this is good or bad. There are a number of things you could look at here to help make the Judgment, which include: o How will it impact on future performance of the firm? O How does it compare with other businesses in a similar market? Search competitors) o What would the results have been if predictions as shown in the cash flow forecast had been true – would performance have been better or worse? When writing your conclusion, remember that this is a new business set up and Signature’s performance should be written in this context. Profit Problems at Days Industrial Paints ply When Mike Manley was appointed as Managing Director of Days Industrial Paints ply at the end of 2009, he was determined to improve the company’s overall profitability.

He carefully examined all the aspects of the company’s operations and made changes o bring about his objectives.