Financial ratios — liquidity, profitability, gearing

What you'll learn

1. 1

   Imagine your business is a pizza shop 🍕. Liquidity ratios check if you have enough cash to pay the delivery driver tonight. Profitability ratios check if you're making enough profit on each pizza. Gearing ratios check how much you borrowed…

2. 2

   Which ratio checks if you can pay your short-term bills?

3. 3

   Let's calculate the current ratio (a liquidity ratio) for Pizza Palace 🏪.

4. 4

   Now you try! Pizza Planet has £80,000 current assets and £40,000 current liabilities. What's the current ratio?

5. 5

   What current ratio did you get for Pizza Planet?

6. 6

   Now let's look at profitability — the net profit margin. How much profit from each £1 of sales?

7. 7

   A business has £200,000 revenue and £30,000 net profit. What's the net profit margin?