{"id":4032,"date":"2023-10-06T09:10:56","date_gmt":"2023-10-06T09:10:56","guid":{"rendered":"http:\/\/localhost\/ecole9ja\/?p=4032"},"modified":"2023-10-06T09:13:34","modified_gmt":"2023-10-06T09:13:34","slug":"week-2-and-3-ss3-second-term-financial-accounting-notes","status":"publish","type":"post","link":"https:\/\/ecolebooks.com\/nigeria\/posts\/week-2-and-3-ss3-second-term-financial-accounting-notes\/","title":{"rendered":"Week 2 and 3 &#8211; SS3 Second Term Financial Accounting Notes"},"content":{"rendered":"<p>\u00a0<strong>WEEK TWO AND THREE<br \/>\n<\/strong><strong>TOPIC: ACCOUNTING RATIOS AND INTERPRETATION OF FINANCIAL STATEMENTS<br \/>\n<\/strong><strong>CONTENT<\/strong><\/p>\n<ul>\n<li>Introduction\n<\/li>\n<li>Uses of ratio\n<\/li>\n<li>Disadvantages of using ratio\n<\/li>\n<li>Types of ratio \u2013 explanation\n<\/li>\n<li>Illustration\n<\/li>\n<\/ul>\n<p>\u00a0<strong>INTRODUCTION<br \/>\n<\/strong>To interpret accounts is to try to gain insight into the information value of financial statements , this can be done through analysis, evaluation ,criticism and comparison and all this is done by the use  of  accounting ratios. A ratio can be defined as the relationship that exists between two figures.<br \/>\n<strong>USES OF RATIO<br \/>\n<\/strong><\/p>\n<ol>\n<li>Ratios are used in preparing industrial averages.\n<\/li>\n<li>They can be used to interpret financial statements.\n<\/li>\n<li>They help in comparing performances between and among related organizations.\n<\/li>\n<li>Ratios help to measure the ability of a given entity to meet its short-term obligations.\n<\/li>\n<li>They are used in evaluating the performance of companies in the same business\n<\/li>\n<\/ol>\n<p>\u00a0<strong>DISADVANTAGES OF USING RATIO<br \/>\n<\/strong><\/p>\n<ol>\n<li>Ratios can easily be affected by inflation\n<\/li>\n<li>They can be manipulated upon or abused\n<\/li>\n<li>Different accounting policies affect ratio calculation\n<\/li>\n<\/ol>\n<p>\u00a0<strong>TYPES OF RATIO<br \/>\n<\/strong><\/p>\n<ol>\n<li>Profitability and efficiency ratio\n<\/li>\n<li>Liquidity ratio\n<\/li>\n<li>Investment ratio\n<\/li>\n<\/ol>\n<p>\u00a0<strong>PROFITABILITY AND EFFICIENCY<\/strong>:<br \/>\nProfitability and efficiency ratios measure the effectiveness of the management as shown by the returns obtained on sales and capital invested. This can be broken down into the following.<\/p>\n<ol>\n<li>Net profit%\n<\/li>\n<li>Gross profit%\n<\/li>\n<li>Returns on capital employed\n<\/li>\n<li>Assets turnover ratio\n<\/li>\n<li>Individual expenses items to sales ratio e.g advertising carriage outwards etc\n<\/li>\n<\/ol>\n<p>\u00a0Formulae:<\/p>\n<ol>\n<li>NP% = NET PROFIT \u00d7 100\n<\/li>\n<\/ol>\n<p>                      SALES          1<\/p>\n<ol>\n<li>GP%  =  GROSS PROFIT \u00d7  100\n<\/li>\n<\/ol>\n<p>                       SALES                1<\/p>\n<ol>\n<li>Returns on capital employed ROCE. This measures management ability to utilize effectively the organizations resources.\n<\/li>\n<\/ol>\n<p>It is        PROFIT                             \u00d7   100<br \/>\n              CAPITAL EMPLOYED                  1<br \/>\nWhere capital employed can be:<br \/>\na) total asset  b) total assets to current liabilities<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>ASSETS TURNOVER RATIO:\n<\/li>\n<\/ol>\n<p>This ratio measures the turnover generated by assets and show how fully a company is utilizing its assets.<br \/>\nFormula:           SALES<br \/>\n\t\t\u00a0\u00a0\u00a0\u00a0CAPITAL EMPLOYED<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>INDIVIDUAL EXPENSE TO SALES:\n<\/li>\n<\/ol>\n<p>This helps to reveal the reason for improvement or reduction in the net profit to sales.<br \/>\nFormula: INDIVIDUAL EXPENSES \u00d7 100<br \/>\n                          SALES                   1<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>LIQUIDITY RATIOS:\n<\/li>\n<\/ol>\n<p>These ratios help in measuring the ability of an organization to meet its obligations as they fall due.Ratios under this heading are:<\/p>\n<ol>\n<li>Current ratio  or working capital ratio\n<\/li>\n<li>Average stock\n<\/li>\n<li>Stock to net current assets\n<\/li>\n<li>Debtors ratio\n<\/li>\n<li>Creditors ratio\n<\/li>\n<\/ol>\n<p>\u00a0<\/p>\n<ol>\n<li>Current ratio or working capital ratio: This ratio indicates the ratio of current assets to current liabilities. It shows the extent the firm can meet up with  its short-term creditors. Low ratio implies lack of working capital while high ratio suggests too much of working capital or capital tied up.\n<\/li>\n<\/ol>\n<p>Formula: CURRENT ASSETS<br \/>\n\t\t\tCA<br \/>\n\t\t                CURRENT LIABILITIES                  CL<\/p>\n<ol>\n<li>ACID- TEST\/LIQUID RATIO:\n<\/li>\n<\/ol>\n<p>This ratio provides measures of the firm&#8217;s ability to meet its current liability. Should it fall below 1:1,the firm may have some difficulty in paying its debt.<\/p>\n<p>\u00a0Formula: CURRENT ASSETS \u2013 STOCK OR INVENTORY<br \/>\n                               CURRENT LIABILTIES<\/p>\n<ol>\n<li>STOCK TURNOVER RATIO:\n<\/li>\n<\/ol>\n<p>This is used to measure the number of times stocks are replaced during a given period.<\/p>\n<p>\u00a0Formula:         COST OF GOODS SOLD<br \/>\n\t\t                         AVERAGE STOCK<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>AVERAGE STOCK: OPENING STOCK + CLOSING STOCK\n<\/li>\n<\/ol>\n<p>                                                                       2<br \/>\n<strong>N.B<\/strong>: Where there is no opening stock,average stock could be calculated by adding closing stock to purchases and dividing by 2<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>STOCK TO NET ASSET. This ratio is used to express the stock as a percentage of net assets.\n<\/li>\n<\/ol>\n<p>Formula: =          STOCK             \u00d7  100<br \/>\n                      NET ASSET                 1<\/p>\n<ol>\n<li>DEBTORS RATIO: Debtors ratio measures the average collection period  from debtors. It shows the average credit period given to debtors.\n<\/li>\n<\/ol>\n<p>Formula:     DEBTORS           \u00d7   365 DAYS<br \/>\n               CREDIT SALES<br \/>\nLong collection dates indicate poor credit policy.<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>CREDITORS RATIO: This ratio shows the average credit period received from suppliers.\n<\/li>\n<\/ol>\n<p>Formula: TRADE CREDITORS     \u00d7 365 DAYS<br \/>\n              CREDIT PURCHASES<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>\n<div>INVESTMENT RATIOS : These ratios used by investors to evaluate the return,which they receive from their investments, they cover the following:\n<\/div>\n<ol>\n<li>Earnings per share ratio\n<\/li>\n<li>Price earning ratio\n<\/li>\n<li>Earning yield\n<\/li>\n<li>Dividend yield\n<\/li>\n<li>Dividend cover\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>\u00a0<\/p>\n<ol>\n<li><strong>EARNINGS PER SHARE RATIO<\/strong>: This ratio compares the net earnings attributable to the shares to the number of shares issued.\n<\/li>\n<\/ol>\n<p>\u00a0Formula: PROFIT AFTER TAX(PAT)  &#8211;   LESS PREFERENCE DIVIDEND.<br \/>\n                                        NOS. OF EQUITY SHARE<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li><strong>PRICE EARNING RATIO<\/strong>: This ratio considers the average price of the share to the reported earnings per share.\n<\/li>\n<\/ol>\n<p>Formula: MARKET VALUE  PER SHARE<br \/>\n                EARNINGS PER SHARE<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li><strong>DIVIDEND YIELD<\/strong>: This ratio measures  the current actual returns on the shareholders investment.\n\t\t\t\t<\/li>\n<\/ol>\n<p>Formula: DIVIDEND PER SHARE<\/p>\n<p>\t\t\t\u00d7   100<br \/>\n                 SHARE PRICE                  1<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li><strong>DIVIDEND COVER<\/strong>: This ratio compares the earnings per share to the dividend per share.\n\t\t\t\t<\/li>\n<\/ol>\n<p>Formula: EARNING PER SHARE   =  EPS<br \/>\n\t\t               DIVIDEND PER SHARE     DPS<br \/>\nDividend cover is also called payout ratio.<\/p>\n<p>\u00a0<strong>EVALUATION<br \/>\n<\/strong>1.\u00a0\u00a0\u00a0\u00a0State three limitations to the use of accounting ratios in evaluating and comparing business organizations<br \/>\n2.\u00a0\u00a0\u00a0\u00a0List five uses of accounting ratios.<strong><br \/>\n\t\t\t<\/strong><br \/>\n\u00a0<strong>ILLUSTRATION:<br \/>\n<\/strong>The following was extracted from the books of capital ltd for two years, 31\/12\/001\/002.<\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td><strong>                                                  2001<\/strong><\/td>\n<td><strong>     2002<\/strong>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0<\/td>\n<td>\u20a6<\/td>\n<td>\u20a6<\/td>\n<td>\u20a6<\/td>\n<td>\u20a6<\/td>\n<\/tr>\n<tr>\n<td>Sales \u00a0<\/td>\n<td>\u00a0<\/td>\n<td>60,000\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>90,000\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Less\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>cost of sales\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Opening stock\u00a0<\/td>\n<td>18,750\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>16,875\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Add purchases\u00a0<\/td>\n<td>37,500\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>68,250\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0<\/td>\n<td>56,250\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>85,125\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Less closing stock\u00a0<\/td>\n<td>11,250\u00a0<\/td>\n<td>45,000\u00a0<\/td>\n<td>13,125\u00a0<\/td>\n<td>72,000\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Gross profit\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>15,000\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>18,000\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Less expenses\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>7.500\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>6,750\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Net profit<\/td>\n<td>\u00a0<\/td>\n<td>7,500\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>11,250\u00a0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Balance sheet\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Fixed asset\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Motor car\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>15,000\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>10,500\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Current asset\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Stock\u00a0<\/td>\n<td>11,250\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>13,125\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Debtors \u00a0<\/td>\n<td>18,750\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>15,000\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Bank \u00a0<\/td>\n<td>3,750\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>1,875\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>33,750\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>30,000\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Less current liability\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Creditors\u00a0<\/td>\n<td>3,750\u00a0<\/td>\n<td>30,000\u00a0<\/td>\n<td>7,500\u00a0<\/td>\n<td>22,500\u00a0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>31,500<\/td>\n<td>\u00a0<\/td>\n<td>33,000\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Financed by:\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Capitals \u00a0<\/td>\n<td>\u00a0<\/td>\n<td>28,500\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>27,000\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Add net profit\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>7,500\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>11,250\u00a0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>36,000\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>38,250\u00a0<\/td>\n<\/tr>\n<tr>\n<td>Less drawing\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>4,500\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>5,250\u00a0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>31,500\u00a0<\/td>\n<td>\u00a0<\/td>\n<td>33,000\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>\u00a0You are required to calculate the following ratios.<br \/>\ni. Gross profit ii. Net profit iii. Expenses as a % of sales iv. Stock turnover v. Current ratio vi. Acid \u2013 test ratio vii. Rate of returns on capital employed viii. Creditors \/Purchases ratio ix. Debtors\/sales ratio ix. Average stocks <\/p>\n<p>\u00a0<strong>Solutions:<br \/>\n<\/strong><\/p>\n<ol>\n<li>GP%      =  GP              \u00d7 100\n<\/li>\n<\/ol>\n<p>                     SALES             1<\/p>\n<p>\u00a02001 = 15,000    \u00d7    100     =    25%<br \/>\n             60,000            1  <\/p>\n<p>\u00a0<br \/>\n\u00a02002  = 18,000    \u00d7    100   = 20%<br \/>\n              90,000          1<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>NET PROFIT%  =    NP         \u00d7    100\n\t\t\t<\/li>\n<\/ol>\n<p>                             SALES              1<br \/>\n2001   =  7,500   \u00d7   100     =  12.5%<br \/>\n               60,000       1<br \/>\n2002   =  11,250      \u00d7    100   =12.5%<br \/>\n               90,000             1<\/p>\n<ol>\n<li>EXPENSES AS A % OF SALES  = EXPS.   \u00d7    100\n\t\t\t<\/li>\n<\/ol>\n<p>                                                SALES           1<br \/>\n   2001  =   7,500    \u00d7   100    =   12.5%<br \/>\n                60,000          1<br \/>\n2002  =     6,750     \u00d7    100   = 7.5 %<br \/>\n               90,000            1 <\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>STOCK TURNOVER =  COST OF GOODS SOLD\n\t\t\t<\/li>\n<\/ol>\n<p>                                      AVERAGE STOCK<br \/>\n2001        45,000                       =     45,000       = 3TIMES<br \/>\n         (18750 + 11,250)<sup>1<\/sup>\/<sub>2<\/sub>                15,000<\/p>\n<p>\u00a02002          72,000                     =   72,000        =  4.8 TIMES<br \/>\n         (16,875 + 13,125)<sup>1<\/sup>\/<sub>2<\/sub>             15,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<\/p>\n<ol>\n<li>CURRENT RATIO      =                CURRENT ASSETS\n\t\t\t<\/li>\n<\/ol>\n<p>                                               CURRENT LIABILITIES<\/p>\n<p>\u00a02001     =    33,750     =  9   = 9:1<br \/>\n                    3,750          1<\/p>\n<p>\u00a02002   =   30,000      =  4  =   4:1<br \/>\n                  7,500         1<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>ACID TEST RATIO  =   CURRENT ASSET \u2013 STOCK\n\t\t\t<\/li>\n<\/ol>\n<p>                                            CURRENT LIABILITIES<\/p>\n<p>\u00a02001  =   33,750  &#8211;  11,250<br \/>\n\t\t                       3,750<br \/>\n          =   22,500    =   6  =  6:1<br \/>\n                3,750          1<\/p>\n<p>\u00a02002    =  30,000 \u2013 13,125  =   1,687   =  225<br \/>\n                        7,500              7,500        10<\/p>\n<p>\u00a0                                                              = 2.25<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li>\n<div><strong> RETURNS ON CAPITAL EMPLOYED<br \/>\n<\/strong><\/div>\n<p>=    NP                                           \u00d7       100<br \/>\n    CAPITAL EMPLOYED                               1<\/p>\n<p>\u00a0<strong>N.B:<\/strong>  Capital employed is total assets less current liabilities.<\/p>\n<p>\u00a02001    =     7,500    \u00d7    100  = 23.8%<br \/>\n                 31,500            1<br \/>\n2002  =   11.250     \u00d7   100   = 34%<br \/>\n                33,000          1<\/p>\n<p>\u00a0<\/li>\n<li><strong>CREDITORS\/PURCHASES RATIO<\/strong> =  CREDITORS\n\t\t\t<\/li>\n<\/ol>\n<p>                                                            PURCHASES<br \/>\n2001 =  3,750     \u00d7    365 DAYS       365 DAYS OR (12 MOS.)<br \/>\n             37,500<br \/>\n        =  36.5 DAYS OR 1.2 MONTHS<\/p>\n<p>\u00a02002 =   7.500    \u00d7   365 DAYS<br \/>\n              68,250<br \/>\n       =  40.11 DAYS OR 1.3 MONTHS<\/p>\n<p>\u00a0<\/p>\n<ol>\n<li><strong>DEBTORS\/SALES RATIO  <\/strong>= DEBTORS    \u00d7  365 DAYS\n<\/li>\n<\/ol>\n<p>                                                       SALES<br \/>\n    2001  =       18750   \u00d7   365 DAYS<br \/>\n                       60,000<br \/>\n              =  114 DAYS OR 3-8 MONTHS<br \/>\n   2002  =  15,000  \u00d7   365 DAYS<br \/>\n                  90,000<br \/>\n            = 60-8 DAYS OR 2 MONTHS<\/p>\n<ol>\n<li><strong>AVERAGE STOCK<\/strong> = (OPENING STOCK + CLOSING STOCK) \u00bd\n<\/li>\n<\/ol>\n<p>\u00a0     2001 = 18750 + 11250   =  15000<br \/>\n                             2<br \/>\n   2002  =  16,875 + 13,125   = 15000<br \/>\n                           2<\/p>\n<p>\u00a0<strong>EVALUATION<\/strong><\/p>\n<ol>\n<li>What is the formula for stock turnover\n<\/li>\n<li>What is the other name for stock turnover\n<\/li>\n<\/ol>\n<p>\u00a0<strong>GENERAL EVALUATION\/REVISION QUESTIONS<br \/>\n<\/strong><\/p>\n<ol>\n<li>\n<div>What is depreciation\n<\/div>\n<\/li>\n<\/ol>\n<ol>\n<li>\n<div> Explain the following methods of calculating depreciation (i) staight line  (ii) reducing balance     (iii) sum of the years digit\n<\/div>\n<ol>\n<li>\n<div>What is the difference between depreciation and amortization\n<\/div>\n<\/li>\n<li>\n<div>State ten uses of the general journal\n<\/div>\n<\/li>\n<li>\n<div>Explain the principle of double entry system\n<\/div>\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>\u00a0<strong>READING ASSIGNMENT<br \/>\n<\/strong>Essential Financial Accounting page 308-317<\/p>\n<p>\u00a0<strong>WEEKEND ASSIGNMENT<br \/>\n<\/strong><\/p>\n<ol>\n<li>\n<div>Which of the following formulae is for average stock?( a) (sales \u2013 returns)1\/2 ( b) (opening stock + purchases)1\/2   (c) (opening stock + closing stock)\u00f7 2  (d) net profit\/2 + opening stock\n<\/div>\n<p>\u00a0<\/li>\n<li>\n<div>What is the formula for stock turnover?\n<\/div>\n<p>(a) cost of goods sold    (b )  sales \u2013 returns   ( c)sales \u00f7 returns  (d) profit + sales &#8211; returns<br \/>\n      average stock                       inwards\n<\/li>\n<\/ol>\n<p>3.    ROCE is calculated thus<br \/>\n       (a) NP   \u00d7    100     (b)    SALES        \u00d7    100     ( c)       NP              \u00d7  100            (d)  GP + NP\/SALES<br \/>\n       SALES                    PURCHASES                          NET ASSETS<br \/>\n4.   Acid \u2013 test ratio is obtained by (a) current assets \u2013 stock      ( b) total assets \u2013 stock<br \/>\n\t\t                                                                current liabilities                    current liability<br \/>\n      (c) current assets \u2013 current liability   (d) current assets + current liabilities<br \/>\n5.   When current asset is less than current liability it means (a) over trading (b) under trading (c) optimum<br \/>\n       trading     (d) counter trading<\/p>\n<p>\u00a0<strong>THEORY<br \/>\n<\/strong><\/p>\n<ol>\n<li>Explain a) debtors \/sales ratio      b) creditors\/purchases ratio\n<\/li>\n<li>What will be revealed to a business when the above ratios are compared?\n<\/li>\n<\/ol>\n<p><strong><br \/>\n\t\t\t<\/strong>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u00a0WEEK TWO AND THREE TOPIC: ACCOUNTING RATIOS AND INTERPRETATION OF FINANCIAL STATEMENTS CONTENT Introduction Uses&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,313],"tags":[],"class_list":["post-4032","post","type-post","status-publish","format-standard","hentry","category-posts","category-second-term-ss3-financial-accounting"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/4032","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/comments?post=4032"}],"version-history":[{"count":1,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/4032\/revisions"}],"predecessor-version":[{"id":4033,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/4032\/revisions\/4033"}],"wp:attachment":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/media?parent=4032"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/categories?post=4032"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/tags?post=4032"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}