Business Studies (AS)·The accounting function, planning & controlling · NSSCAS 2.3
Analysing financial statements with ratios
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You already keep accounts from NSSCO — now you must read them and judge how well a business is really doing. In this lesson you will take one Namibian shop's Income Statement and Statement of Financial Position and squeeze real meaning out of them using performance, liquidity and solvency ratios. Every ratio is worked as a write-on: formula, then substitute the N$ figures, then box the answer to two decimal places. You will also learn the trap that catches many candidates — why a profitable business can still run out of cash.
What you'll learn in this lesson
By the end you should be able to (NSSCAS Business Studies (AS) 2.3):
- assess simple quantitative accounting data, in particular the financial statements (Income Statement and Statement of Financial Position, including working capital) of a business, using performance ratios (return on capital employed, gross margin (%), net profit margin (%)), liquidity ratios (current ratio, quick ratio/liquid ratio, rate of inventory turnover) and the solvency ratio
- distinguish between retained profit and cash
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Miss Maria and Mike talk through the whole topic — with the figure and working drawn live.