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Page 1
Profitability Ratios
Gross profit margin and profit margin show how much profit is made from sales after different levels of cost.
Profit / Sales x 100
Remember
Compare with past years or similar businesses.
Accounting Student Book 2 chapters
Study
3 pages
Analysis and Decisions
Reference: Pearson Edexcel International AS / A Level Accounting Student Book 2. Analysis explains what the numbers mean. Use ratios as tools, then connect the result to the business context rather than treating the calculation as the whole answer.
What you'll learn
Main skills from this lesson
Calculate profitability, liquidity and efficiency ratios
Interpret ratio results in context
Use accounting information to support decisions
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Page 2
Liquidity Ratios
Current ratio and liquid ratio show whether a business may be able to pay short-term debts.
Current Assets / Current Liabilities
Remember
Too low can be risky; too high can mean idle resources.
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Page 3
Decision-Making
Accounting information supports pricing, credit control, inventory management and investment decisions, but it should be combined with non-financial evidence too.
Numbers + Context
Remember
A good answer calculates, interprets and recommends.
Great work
Continue with quizzes, flashcards, or games when you are ready.