Liquidity:
| there are two liquidity ratios: current working capital ratio and the acid test ratio. These ratios tell a business how able it is to meet its short-term debts. They are expressed as a figure to 1 |
| Efficiency: | there is one efficiency ratio: stock turnover rate. This tells a business how well it is managing its stock. This ratio is expressed as a number, indicating the number of times a business sells and replaces its average stock |
| Cost of goods sold/sales: | this is the amount of money that a business has paid for the goods which it has sold.
Cost of sales = (opening stock + purchases) - closing stock |
| Opening stock: | this is the value of stock that the business has at the start of the financial year. It is the closing stock figure from the previous financial year |
| Closing stock: | this is the value of stock that the business has at the end of the financial year, ie what it didn't sell. It will become the opening stock figure for the next financial year |
| Average stock: | this is calculated by adding the figures for opening and closing stock together and dividing by two |
| Current asset: | this is something which a business owns and that will change in value in less than a year. The main current assets are stock, debtors, money in the bank and cash |
| Current liability: | this is something which a business owes. Current liabilities have to be paid back within one year. The two main current liabilities are overdrafts and creditors |
