Accounting and finance · Level 3, managers, analysts and lenders
Accounting ratio analysis
The ratios that matter, what they miss, and how they are dressed up.
- 1modules
- 2.5CPD hours
- 60guided minutes
- Freealways
About this course
A ratio turns a number you cannot interpret into a comparison you can. Two million pounds of profit means nothing until you know whether it came from ten million or two hundred million of capital.
This course covers profitability, liquidity, efficiency and gearing, and it spends as much time on the limits of each ratio as on the formula, because a ratio quoted without its context is the most confidently wrong number in business.
What you will be able to do
- Calculate and interpret the main profitability, liquidity, efficiency and gearing ratios
- Choose the right comparison: prior period, budget or sector
- Explain what each ratio cannot tell you
- Recognise how period end timing can flatter a ratio
Modules
Assessment and certificate
Knowledge check after each module and a final assessment at 80 per cent, with unlimited attempts.
A free digital certificate with a verification code that any employer can check, plus an entry on your CPD record.
Questions
What is a good current ratio?
There is no universal figure, and anyone quoting one is selling something. A supermarket holding fast moving stock and taking cash at the till operates safely far below the textbook two to one, because its cash conversion is almost immediate. Compare to the same business last year and to its own sector.
Can ratios be manipulated?
Easily, and often legally. A business can delay paying suppliers until after the year end date, or push a stock delivery into the next period, and its liquidity ratios improve without anything real changing. This is why a single date is weaker evidence than a trend.