3.5 Profitability and Liquidity Ratio Analysis

Assessment Objective
The following profitability and efficiency ratios: gross profit margin net profit margin ROCE	AO2, AO4
Possible strategies to improve these ratios	AO3
The following liquidity ratios: current acid-test/quick	AO2, AO4
Possible strategies to improve these ratios	AO3

• Profitability Ratios – a concise explanation of gross profit margin, net profit margin and return on capital employed.

• Liquidity Ratios – a concise explanation of the current and quick ratios.

• Current Ratio – an explanation of the current and quick ratios.

• Financial Ratios – an explanation of profitability and liquidity ratios and other financial ratios.