Accounting Process

• Financial transaction- passing journal entry - prepare ledger account• Trial balance- two columns• Manufacturing A/C - cost of production• Trading A/C - gross profit• Profit & Loss A/C• Profit & Loss adjustment A/C

Profitability ratios

• Return on capital employed (ROCE) (the primary ratio)

• (Secondary ratios)• Profit before interest and tax/capital

employed• Net profit/Sales• Gross Profit/Sales

Ratios showing utilisation of resources

• Sales/capital employed

• Sales/Total assets

• Sales/non-current assets

• Sales/Current assets

Financial ratios

• Current ratio (current assets/current liabilities)• Liquidity ratio (current assets-inventory/ current

liabilities)• Inventory turnover (cost of sales/average

inventory)• Trade Receivables collection period(Trade

receivables*365/credit sales)• Trade Payables payment period(Trade

payables*365/credit purchases)

Investment ratios

• Gearing (fixed cost capital/total capital)• Debt/equity ratio (fixed cost capital/equity)• Interest cover• Earnings per share• Price earnings ratio (PER)• Dividend cover• Dividend yield

Najim Sole Trading For The Years Ended 31 Dec 2011 and 31 Dec 2010

• Gross profit percentage: Gross Profit / Sales * 100 2010 --- 60,308 / 172,308 = 35.00% 2011 --- 60,000 / 187,500 = 32.00%• Net profit percentage : Net Profit / Sales * 100 2010 --- 21,539 / 172,308 = 12.50% 2011 --- 27,322 / 187,500 = 14.57%