Section C:

Calculate the following ratios using the financial statements in Section B. Follow each calculation with a sentence explaining what the ratio tells you about the business:

1. ROCE
2. Current Ratio
3. Acid Test
4. Gearing Ratio

There is a maximum of 20 marks available for this section, 2 marks for the correct calculation and 3 marks for the explanation for each ratio.

Ratio formulas:

Return on Capital Employed = Operating Profit / Total Assets minus Current Liabilities x 100

Current Ratio = Current Assets / Current Liabilities

Acid Test = Current Assets - Inventories / Current liabilities

Gearing Ratio = Non-current Liabilities / (Equity plus Non-current Liabilities) x 100