Key ratios

In this lesson

1. 0:00 Key ratios overview and profitability metrics
2. 1:30 Asset turnover and profit margin calculations
3. 3:21 Return on shareholders funds and equity
4. 4:38 Liquidity ratios and working capital analysis
5. 7:05 Inventory turnover and receivables management
6. 10:02 Investor ratios and earnings per share
7. 12:20 Debt and gearing ratios explained
8. 14:34 Interest cover and ratio analysis limitations
9. 16:03 Operational gearing worked example
10. 17:03 Return on capital employed calculation

About this lesson

The video covers profitability ratios (return on capital employed, asset turnover, profit margins, return on equity), liquidity ratios (current ratio, quick ratio, working capital cycle), investor ratios (dividend yield, earnings per share, price-earnings ratio), and debt and gearing ratios (financial gearing, interest cover). You'll discover how each ratio is calculated, what it reveals about a business, and when to use it in your exam answers and professional analysis. The lesson walks you through the methodology for each ratio with clear definitions and practical context. You'll understand why certain adjustments matter—for example, why the quick ratio excludes inventory, or why receivables days and payables days combine to show your operating cash cycle. The tutor explains the relationship between these metrics and how they fit together to give you a complete picture of financial performance. Two worked examples at the end show you how to apply these ratios to real exam-style scenarios, including calculating operational gearing and return on capital employed from project data. By the end, you'll be confident using ratios to interpret financial statements, compare business performance, and support recommendations in case study questions. This is foundational material that underpins financial analysis across your qualification.

Duration: 19m