Financial performance indicators

In this lesson

1. 0:00 Lesson 18: General Performance Analysis
2. 0:50 Financial Performance Indicators Overview
3. 2:54 Profitability and Efficiency Ratios
4. 5:27 Liquidity Ratios Explained
5. 6:59 Working Capital and Days Ratios
6. 10:23 Gearing and Risk Ratios
7. 12:03 Applying Ratios to Real Scenarios
8. 15:43 Limitations of Financial Metrics Alone

About this lesson

This 17-minute lesson covers the four main ratio categories, walks you through how to calculate each one, and shows you how to apply them in exam-style questions where you need to predict how changes in business decisions affect multiple ratios at once. The lesson starts with profitability and efficiency ratios like return on capital employed, asset turnover, and profit margins, explaining what each measures and why a higher value signals better performance. You'll then explore liquidity ratios—the current ratio, quick ratio, and the working capital cycle ratios (inventory days, receivables days, and payables days)—which tell you how well a company can meet its short-term obligations. Gearing ratios round out the financial picture, showing you the level of financial risk a business carries through its debt obligations. Throughout, you'll see how these ratios connect to real exam questions. The lesson includes a worked example showing how a change in credit policy affects both the current and quick ratios, demonstrating that exam questions often require you to think through the chain of effects rather than simply plugging numbers into a formula. You'll also learn why relying solely on financial metrics can be misleading—accounting judgements, discretionary spending, and the temptation towards short-termism all mean that financial ratios tell only part of the performance story.

Duration: 17m