UEC Accounting Chapter 8 Accounting Ratios

Chapter 8 Accounting Ratios for Accounts interpretation

Definition:
A set of figures to use for accounts interpretation, such as Profit and Loss Account, Balance Sheet, Cash
Flow Statement !o interpret means e"plain something in simple terms for the #enefit of another person
!his approach calls $Ratio anal%sis&
Ratio Anal%sis is a techni'ue used to e(aluate the performance of a compan% )t assumes that there is a
relationship #etween one accounting figure and another in the financial statements
!he interpretation of accounts in(ol(es the anal%sis of financial statements in order to disco(er the
strengths and wea*nesses of a compan% )t aids the ma*ing of sound #usiness decisions
!he users of financial statements also *nown as Sta*eholders and it comprise+
,- E"isting and Potential Shareholders
.- E"isting and Potential Loan Creditors
/- E"isting, potential and past emplo%ees
0- Anal%sts and ad(isors 1 stoc*#ro*ers, trade unions
2- Business contacts 1 customers, suppliers, competitors
3- !he go(ernment 1 ta" authorities, trade agencies
4- !he pu#lic 1 ta"pa%ers, consumers, pressure groups
8- !he management of the compan%
5- Potential )n(estor
!he interpretation is used to assist in+
,- )n(estment 6ecisions
.- Credit Facilities
/- 7anagement Control
)n order to pro(ide the a#o(e parties with a method of measuring the strengths and wea*nesses of a
compan%8s financial position, the use of accounting ratios has #een de(eloped
A ratio is the arithmetic relationship #etween two figures in a set of financial statements )t is onl% of
(alue if used as a #asis of comparison either+
a- )nternall%
9ith the compan%8s results of pre(ious periods, or other sections of the compan%, or with
estimated ratios
#- E"ternall%
9ith the results of other companies in similar industries
,
UEC Accounting Chapter 8 Accounting Ratios
8, Ratios :roup
!here are 0 ma;or groups of ratios normall% used+
,- Profita#ilit% 1 the efficienc% in profit generation
.- Li'uidit% 1 the financial sta#ilit% of the compan%
/- :earing 1 how is the compan% financed
0- )n(estment 1 the return to in(estors
Formula !a#le ,+ Profita#ilit% Ratios
<ame of Ratio Formula Usage
,- :ross Profit
7argin
.- <et Profit 7argin
/- Return on Capital
Emplo%ed
=R>CE-
:ross Profit
???????????????? " ,@@
Sales

<et Profit
???????????????? " ,@@
Sales
<et ProfitA
???????????????????????? " ,@@
Capital Emplo%edA
APro#lem+ 6efinition of <et Profit
And Capital Emplo%ed
Sales generate profit,
:ross Profit margin
indicates the a(erage
mar*?up on the product
sold
!he difference #etween
the gross profit margin
and net profit margin is
due to e"penses
Also *nown as the return
on in(estment, this
percentage return
measures the o(erall
profita#ilit% of the
#usiness
.
UEC Accounting Chapter 8 Accounting Ratios
In Limited Company: Definition of Capital Employed
,- >rdinar% Shareholders8 Capital Emplo%ed
a Paid up share capital
# >rdinar% Share Capital B Reser(e
c !otal Assets 1 Preference Share Capital 1 !otal Lia#ilities
Rate of Return Profit after ta" 1 Preference Share 6i(idends
on >rdinar% Shareholders8 C ????????????????????????????????????????????????????????? " ,@@
Capital Emplo%ed >rdinar% Shareholders8 E'uit%
= Rate of Return on >wners8 E'uit%, Rate of Return on >rdinar% Shareholders8 E'uit%-
.- All Shareholders8 Capital Emplo%ed
a >rdinar% Share Capital B Reser(es B Preference Share Capital
# <et Assets
c !otal Assets 1 !otal Lia#ilities
Rate of Return Profit after !a"
on All Shareholders8 C ???????????????????????????????? " ,@@
Capital Emplo%ed Shareholders8 Fund
=Rate of Return on Shareholders8 fund-
/- Long?term Capital Emplo%ed
a >rdinar% Share Capital B Reser(es B Preference Share Capital B Long?term Lia#ilities
# !otal Assets 1 Current Lia#ilities
c Fi"ed Assets B Current Assets 1 Current Lia#ilities
d Fi"ed Assets B 9or*ing Capital
Rate of Return Profit #efore ta" B )nterest on Long?term Lia#ilities
on Long?term C ????????????????????????????????????????????????????????????????? " ,@@
Capital Emplo%ed Long?term Capital Emplo%ed
0- !otal Capital Emplo%ed
a >rdinar% Share Capital B Reser(es B Preference Share Capital B Long?term Lia#ilities B
Current Lia#ilities
# !otal Assets
Rate of Return Profit #efore ta" B )nterest on Long?term Lia#ilities B
on !otal )nterest on Current Lia#ilities
Capital C ?????????????????????????????????????????????????????????????????????? " ,@@
Emplo%ed !otal Capital Emplo%ed
/
UEC Accounting Chapter 8 Accounting Ratios
Formula !a#le .+ Li'uidit% Ratios = Short?term Sol(enc% Ratios -
A #usiness fails when it cannot pa% its de#ts !he ratio of assets to lia#ilities indicates how easil%
de#ts can #e paid
<ame of Ratio Formula Usage
,- Current Ratio
.- Duic* Ratio
/- Stoc* !urno(er
Ratio
Alternati(e+
0- 6e#tors !urno(er
Ratio
Current Assets
???????????????????????? " ,@@
Current Lia#ilities
Duic* AssetsAA
????????????????????????? " ,@@
Current Lia#ilities
Cost of :oods sold
???????????????????????? " ,@@
A(erage Stoc*AAA
C <o of times per annum
A(erage Stoc*
???????????????????????? " /32 da%s
Cost of :oods sold
C Period ta*en to turn o(er stoc*
Credit Sales
???????????????????????? " ,@@
A(erage 6e#torsAAAA
C <o of times per annum
Average 6e#tors
???????????????????????? " /32 da%s
Credit Sales
C A(erage Credit Allowed
7ost important ratio in
assessing the li'uidit%
Also *nown as 9or*ing
Capital Ratio
Also *nown as the Acid
test, to show the amount
of 'uic* assets a(aila#le
for meeting current
lia#ilities
A low turno(er ma%
mean that the #usiness is
carr%ing too much stoc*
as a result of #ad #u%ing
!o e"press the stoc*
turno(er in no of da%s
!his ratio is calculated to
find the a(erage
collection period
)t is a measure of the
compan%8s credit control
efficienc%
AA Duic* Assets C Current Assets 1 Stoc* 1 Prepaid E"penses
AAAA(erage Stoc* C >pening Stoc* B Closing Stoc* E .
AAAAA(erage 6e#tors C >pening 6e#tors B Closing 6e#tors E .
0
UEC Accounting Chapter 8 Accounting Ratios
Continue Li'uidit% Ratio+
<ame of Ratio Formula Usage
2- Creditors
!urno(er
Ratio
Credit Purchases
???????????????????????? " ,@@
A(erage Creditors
C <o of times per annum
or
Average Creditors
???????????????????????? " /32 da%s
Credit Purchases
C A(erage Credit period
!o calculate the a(erage
pa%ment period and
credit period
!o measure the compan%
will ta*e how long to
settle the de#ts to
creditors
Formula !a#le /+ :earing Ratios = Long?term Sol(enc% Ratios, also *nown as Le(erage -
!he gearing ratio measures the proportion of capital emplo%ed rose #% loan creditors, preference
shares and long?term #orrowings =fi"ed interest de#t- as opposed to e'uit% capital
<ame of Ratio Formula Usage
,- 6e#ts to E'uit%
Ratio
.- 6e#ts to !otal
Capital Ratio
/- )nterest Co(er
Ratio

Long?term Lia#ilities B Preference Share Capital
????????????????????????????????????????",@@
>rdinar% Share Capital B Reser(es
Long?term Lia#ilities B Preference Share Capital
????????????????????????????????????????",@@
>rdinar% Share Capital B Reser(es B 6e#ts
Profit #efore !a" B )nterest
?????????????????????????????????? " ,@@
)nterest

Also *nown as+
6e#ts
????????????????????? " ,@@
>wners8 E'uit%
!o compare internal fund
portion against e"ternal
fund portion
!o compare the e"ternal
fund portion to total fund
Ratio small C less ris* or
(ice?(erse
!o calculate the power of
interest pa%ment
Bigger Ratio C stronger
power to pa% interest
Less ris* to creditors
2
UEC Accounting Chapter 8 Accounting Ratios
Formula !a#le 0+ )n(estment Ratios
!o measure the return for in(estors !he ratios can #e #ased on di(idend or on earnings
<ame of Ratio Formula Usage
,- 6i(idend per
share
.- 6i(idend %ield
/- Earnings per
share =EPS-

0- Price to Earnings
Ratio =PE ratio-
2- 6i(idend Co(er
<et amount pa%a#le to shareholders
????????????????????????????????????????",@@
<um#er of issued shares ran*ing
for di(idend
6i(idend per Share
????????????????????????????????? " ,@@
7ar*et Price per Share
<et Profit after ta", minorit% interest,
e"traordinar% items and preference
di(idend
?????????????????????????????????????????
<um#er of issued shares ran*ing
for di(idend

Price per share
???????????????????????????
Earnings per share
Earnings per Share
???????????????????????????????
<et di(idend per share
or
Profit after ta" 1 Preference share 6i(idend
??????????????????????????????????????????????????????
>rdinar% Share 6i(idend paid F proposed
)nterim 6i(idend B Final
6i(idend C actual net
amount pa%a#le
A !he mar*et price could
#e o#tained from
specialist financial or
#usiness newspapers
!o measure the
profita#ilit% for in(estor
to #u% the share
)t measures the amount of
profit earned for each
ordinar% share
!o show the relationships
#etween earnings per
share and price per share
!o e"press how man%
%ears worth of EPS need
to #e earned to match the
share price
!his is the num#er of
times the ordinar%
di(idend paid is co(ered
#% the earnings
)t measures the e'uit%
shareholders8 income
securit%
3
UEC Accounting Chapter 8 Accounting Ratios
E"amples on Profita#ilit% Ratios+
:ross Profit and <et Profit Ratio leant in #oo**eeping
,-
Balance Sheet as at /, 6ecem#er .@@2
Co A Co B
R7 R7
!otal <et Assets =FA B G CA 1 CL H - .2,@@@ /3,@@@
Capital
>pening Balance at , Ianuar% .@@2 ,8,@@@ .5,@@@
Add+ <et Profit 4,3@@ 4,3@@
.2,3@@ /3,3@@
Less+ 6rawings =3@@- =3@@-
Closing Capital .2,@@@ /3,@@@
Solution+
<et Profit
E
Capital Emplo%ed =a(erage capital-

"
Returns on Capital Emplo%ed C J J
.- Profit & Loss Account R7
<et Profit #efore interest 8,@@@
)nterest on Loan Stoc* .,@@@
<et Profit after interest 3,@@@
Financed by: R7
Shareholders8 fund ,@@,@@@
Loan Stoc* .@,@@@
<et Profit after interest
Returns >n Capital Emplo%ed =R>CE- C ??????????????????????????????????????????????? " ,@@
Shareholders8 E'uit%

C ????????????????????? " C J
4
UEC Accounting Chapter 8 Accounting Ratios
E"ample on Returns on Capital Ratios+
Kin !ong Ltd
E"tracted Balance Sheet as at /, 6ecem#er .@@2
R7
!otal Assets ,42,@@@
Current Lia#ilities =42,@@@- including Ban* o(erdraft
Long?term Lia#ilities+
,.J 6e#entures =,.,@@@-
88,@@@
>rdinar% Shares L R7@2@ /@,@@@
,@J Preference Shares L R7, .@,@@@
Reser(es /8,@@@
88,@@@
R7
Profit #efore ta" F interest .5,.@@
Estimated Corporation ta" 2,@@@
)nterest on Ban* >(erdraft ,,.@@
6e#enture )nterest ,,00@

Appl% the a#o(e data to calculate the following ratios+
,- Rate of Returns on owners8 E'uit%
.- Rate of Return on all shareholders8 Capital Emplo%ed
/- Rate of Return on Long?term Capital Emplo%ed
0- Rate of Return on !otal Capital Emplo%ed
Solution+
Rate of Return Profit after ta" 1 Preference Share 6i(idends
on >rdinar% Shareholders8 C ????????????????????????????????????????????????????????? " ,@@
Capital Emplo%ed >rdinar% Shareholders8 E'uit%

C ??????????????????????????????????????????????????????? "

C J
8
UEC Accounting Chapter 8 Accounting Ratios
Rate of Return Profit after ta"
on All Shareholders8 C ??????????????????????????????????????? " ,@@
Capital Emplo%ed Shareholders8 Fund

C ???????????????????????????????????????????? "

C J
Rate of Return Profit #efore ta" 1 )nterest on Long?term Lia#ilities
on Long?term C ?????????????????????????????????????????????????????????????????? " ,@@
Capital Emplo%ed Long?term Capital Emplo%ed

C ??????????????????????????????????????????????????????? "

C J
Rate of Return Profit #efore ta" 1 )nterest on Long ? )nterest on Current
on !otal term lia#ilities lia#ilities
Capital Emplo%ed C ???????????????????????????????????????????????????????????????????????? " ,@@
!otal Capital Emplo%ed

C ?????????????????????????????????????????????????????????????????? "

C J
9or*ings =,-+ Profit #efore ta" and interest .5,.@@
Less+ Ban* >(erdraft )nterest =,,.@@-
6e#enture )nterest =,,00@-
Profit #efore !a" 26,560
Less+ !a"ation =2,@@@-
Profit after !a" 21,560
5
UEC Accounting Chapter 8 Accounting Ratios
Practice Questions:
Question 1
!he following are the financial statements for two similar t%pes of Stationer% Compan%
!rading and Profit and Loss Account
For !he %ear ended /@ Iune .@@3
ABC Compan% 6EF Compan%
R7 R7 R7 R7
Sales 5@,@@@ ,,@,@@@
Less+ Cost of :oods Sold
>pening Stoc* .@,@@@ ,4,2@@
Purchases 3@,@@@ 88,2@@
8@,@@@ ,@3,@@@
Less+ Closing Stoc* =,2,@@@- =32,@@@- =.@,@@@- =83,@@@-
:ross Profit .2,@@@ .0,@@@
6epreciation .@@@ .,2@@
>ther E"penses 8,@@@ =,@,@@@- 3,2@@ = 5,2@@-
<et Profit ,2,@@@ ,2,@@@
CCCCCC CCCCCC
Balance Sheet as at /@ Iune .@@3
ABC Compan% 6EF Compan%
R7 R7 R7 R7
Fi"ed Assets
E'uipment at Cost ,2,@@@ ..,@@@
Less+ Accumulated 6epreciation =3,@@@- 5,@@@ =0,@@@- ,8,@@@
Current Assets
Stoc* ,2,@@@ .@,@@@
6e#tors /@,@@@ .2,@@@
Ban* 8,@@@ 0,2@@
2/,@@@ 05,2@@
Less+ Current Lia#ilities
Creditors =8,@@@- 02,@@@ = 5,2@@- 0@,@@@
20,@@@ 28,@@@
CCCCCC CCCCCC
Capital
Balance as at , Iul% .@@2 02,@@@ 2@,@@@
Add+ <et Profit ,2,@@@ ,2,@@@
3@,@@@ 32,@@@
Less+ 6rawings =3,@@@- =4,@@@-
20,@@@ 28,@@@
CCCCCC CCCCCC
,@
UEC Accounting Chapter 8 Accounting Ratios
Continue Question 1:
Re'uired+
,- Calculate the following ratios+
a :ross Profit 7argin
# <et Profit 7argin
c E"penses as Percentage of Sales
d Rate of Return on Capital Emplo%ed
e Stoc* !urno(er Ratio
f Current Ratio
g Duic* Ratio
h 6e#tors !urno(er Ratio
i Creditors !urno(er Ratio
.- Comment upon the difference and similarities of the accounting ratios for ABC Compan% F 6EF
Compan% 9hich #usiness seems to #e the most efficientM 9h%M
,,
UEC Accounting Chapter 8 Accounting Ratios
Question 2
!he following are the summariNed !rading and Profit and Loss Accounts and Balance Sheets of :O) Bhd
for the %ear ended /, 6ecem#er .@@0 and .@@2+
!rading and Profit and Loss Account
For !he %ear ended /, 6ecem#er
.@@0 .@@2
R7 R7 R7 R7
Sales ? Cash ,@,@@@ ,2,@@@
? Credit 02@,@@@ 03@,@@@ 23@,@@@ 242,@@@
Less+ Cost of :oods Sold
>pening Stoc* /@,@@@ 2@,@@@
Purchases /.@,@@@ 02@,@@@
/2@,@@@ 2@@,@@@
Less+ Closing Stoc* =2@,@@@- =/@@,@@@- =,@@,@@@- =0@@,@@@-
:ross Profit ,3@,@@@ ,42,@@@
Selling and 6istri#ution = 3@,@@@ - = 8@,@@@ -
<et Profit ,@@,@@@ 52,@@@
CCCCCC CCCCCC
Balance Sheet as at /, 6ecem#er
.@@0 .@@2
R7 R7 R7 R7
Fi"ed Assets .2@,@@@ ..@,@@@
Current Assets
Stoc* 2@,@@@ ,@@,@@@
6e#tors 02,@@@ 3@,@@@
Ban* 2,@@@ ,/,@@@
,@@,@@@ ,4/,@@@
Less+ Current Lia#ilities
Creditors =4@,@@@- /@,@@@ = 08,@@@- ,.2,@@@
.8@,@@@ /02,@@@
CCCCCC CCCCCC
Capital and Reser(es
>rdinar% Share Capital of R7, each ,@@,@@@ ,@@,@@@
Share Premium /@,@@@ /@,@@@
Profit and Loss Account ,2@,@@@ .,2,@@@
.8@,@@@ /02,@@@
CCCCCC CCCCCC
,.
UEC Accounting Chapter 8 Accounting Ratios
Continue Question 2:
Re'uired+
,- Calculate the following ratios+
a :ross Profit 7argin
# <et Profit 7argin
c Rate of Return on >rdinar% Shareholders8 Capital Emplo%ed
d Stoc* !urno(er Period =7onths-
e Current Ratio
f Duic* Ratio
g 6e#tors !urno(er Period =7onths-
h Creditors !urno(er Period =7onths-
.- Compare the ratios and percentages computed and discuss :O) Bhd8s performance for #oth %ears
,/
UEC Accounting Chapter 8 Accounting Ratios
Question 3
IPL Bhd8s issued and full% paid?up capital is as follows+
R7
2@,@@@ 8J Preference Shares of R7, each 2@,@@@
,2@,@@@ >rdinar% Shares of R7, each ,2@,@@@
.@@,@@@
CCCCCC
!he following information is rele(ant as to its financial %ear ;ust ended+
, Profit after ta"ation at 0@J + R73@,@@@
. >rdinar% di(idend paid + .@J
/ 7ar*et price of ordinar% share + R72
Re'uired+
a 6i(idend Kield
# >rdinar% 6i(idend Co(er
c Earnings per Share
d Price Q Earnings Ratio
,0
UEC Accounting Chapter 8 Accounting Ratios
Question 4
!he following financial information is made a(aila#le in respect of two companies manufacturing
agricultural e'uipment in respect of the %ear ended /, 6ecem#er .@@3
C7L Ltd !BL Ltd
R78@@@ R78@@@
Sales .,0@@ .,82@
7anufacturing e"penses =e"cluding plant depreciation- ,,5.@ .,/@@
Administration e"penses 5@ 8@
Selling e"penses ,/2 ,4@
Plant, at cost ,,@8@ 53@
6epreciation on plant to /, 6ecem#er .@@2 //@ .8@
Creditors /3@ 53@
Stoc* and 9or*?in?progress /2@ 3,@
6e#tors and Cash /4@ 2@@
Profit and Loss at /, 6ecem#er .@@2 .22 =/@-
Called?up ordinar% share capital =R7, shares- 3@@ 32@
6epreciation on plant is to #e charged at ,@J on cost
Re'uired+
,- !rading and Profit and Loss Accounts for the %ear ended /, 6ecem#er .@@3 and Balance Sheet at that
date in respect of each compan%
.- Computation of the following accounting ratios for each compan% #ased on the financial statements
produced in =,-+
a :ross Profit 7argin
# <et Profit 7argin
c Return on !otal Capital Emplo%ed
d Return on >wners8 E'uit%
e 9or*ing Capital Ratio
f Li'uidit% Ratio
/- A #rief e(aluation of the o(erall performance of each compan% in the %ear
,2
UEC Accounting Chapter 8 Accounting Ratios
Question 5 14%
:i(en the !rading and Profit and Loss Accounts and Balance Sheets of COR !rading and COK Sdn Bhd
for the period ended /, 6ecem#er .@@2+
!rading And Profit And Loss Accounts for the %ear ended /, 6ecem#er .@@2
COR !rading COK Sdn Bhd
Sales?Cash
?Credit
>pening stoc*
Purchases
Less+ Closing stoc*
:ross profit
Less+ Administration F Financial E"penses
Selling F 6istri#ution E"penses
<et Profit
R7
.,@2@
.,,02@
./,2@@
=/,.@@-
,,@@@
,,42@
R7
0,@8@
..,.2@
.3,//@
=.@,/@@-
3,@/@
=.,42@-
/,.8@
R7
.,80@
,4,5@@
.@,40@
=,,4@@-
,,4@@
.,.3@
R7
4,83@
,5,3.@
.4,08@
=,5,@0@-
8,00@
=/,53@-
0,08@
Balance Sheet As At /, 6ecem#er .@@2
COR !rading COK Sdn Bhd
Fi"ed Assets
Stoc*
!rade 6e#tors
Cash And Ban* Balances
Prepa%ment
>rdinar% Shares Capital
,@J Preference Share Capital
Retained Earning
8J 6e#entures
!rade Creditors
Accruals
R7
03,./@
/,.@@
2,02@
4,32@
/.@
3.,82@
.8,@@@
,@,@@@
,@,4,@
2,@@@
8,32@
05@
3.,82@
R7
0@,24@
,,4@@
5,@@@
,2,43@
24@
34,3@@
.0,@@@
5,@@@
,/,0.@
,2,@@@
2,52@
./@
34,3@@
!he directors of #oth companies are recommending an ordinar% di(idend of 2J for the current %ear
Re'uired+
!o calculate the following ratios for #oth companies+
=,- Profit 7argin =.- 6i(idend Co(er
=/- Acid !est Ratio =0- Stoc* !urno(er Ratio
=2- Sales to 9or*ing Capital Ratio =3- Creditors A(erage Pa%ment PeriodS
=4- 6e#tors A(erage Collection Period
,3
UEC Accounting Chapter 8 Accounting Ratios
Question 6 20%
9rite out the formulas of the accounting ratios used in compan% reports+
=,- Rate of Return on Capital Emplo%ed #% Suppliers of Long?term CapitalS
=.- Rate of Return on Capital Emplo%ed #% >rdinar% ShareholdersS
=/- Stoc* !urno(er RatioS
=0- A(erage <um#er of 6a%8s Sales in Stoc*S
=2- A(erage Collection Period =6a%s-S
=3- Earning per ShareS
=4- PriceQEarning RatioS
=8- Capital :earing Ratio
,4
UEC Accounting Chapter 8 Accounting Ratios
Question 7 20%
!he following were the Balance Sheets as at /, 6ecem#er .@@2 of two companies which distri#uted the
same t%pe of goods+
RR Sdn Bhd KK Sdn Bhd
Fi"ed Assets =<BT-
Stoc*
6e#tors
Ban*
>rdinar% Shares Capital
Retained Earning
Creditors
R7
2.@,@@@
,5.,@@@
38,@@@
.@,@@@
8@@,@@@
/.@,@@@
0@@,@@@
8@,@@@
8@@,@@@
R7
/.@,@@@
08,@@@
,4,@@@
45,@@@
030,@@@
/.@,@@@
30,@@@
8@,@@@
030,@@@
!he !rading And Profit And Loss Accounts for the %ear ended /, 6ecem#er .@@2 were shown #elow+
R7 R7
Sales
>pening stoc*
Purchases
Less+Closing stoc*
Cost of goods sold
:ross profit
Less+E"penses
<et profit
8@@,@@@
,.8,@@@
3.0,@@@
42.,@@@
=,5.,@@@-
23@,@@@
.0@,@@@
=,5@,@@@-
2@,@@@
8@@,@@@
/.,@@@
3@@,@@@
3/.,@@@
=08,@@@-
280,@@@
.,3,@@@
=,4@,@@@-
03,@@@
Re'uired+
a- Calculate the following accounting ratios for #oth companies+
, :ross Profit Ratio . <et Profit Ratio
/ Stoc* !urno(er Ratio 0 9or*ing Capital
2 Duic* Ratio 3 Rate of Return on >rdinar% Shareholders8 E'uit%
4 6e#tors A(erage Collection Period =9ee*s-
8 Creditors A(erage Pa%ment Period =9ee*s-
#- <ame an% . users of financial reports
c- State the use of accounting ratios
,8