Accounting Ratios & Financial Analysis – Complete Exam Preparation Notes with Case Studies

Accounting Ratios & Financial Analysis Notes
A Complete Study Pack for Exam Preparation

Compiled by Claire


Section 1: Quality Motors Case Study (2001–2002)
Balance Sheets (Ugx. ‘000)
Assets 2002 2001

Non-current assets

Land & Buildings (Cost) 600 450

Less: Depreciation (200) (150)

Net Land & Buildings 400 300

Plant & Machinery (Cost) 600 400

Less: Depreciation (120) (100)

Net Plant & Machinery 480 300

Total Non-current Assets 880 600

Current Assets

Cash 500 200

Inventory 600 300

Receivables 1,100 500

Total Current Assets 2,200 1,000

Total Assets 1,980 1,100




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, Equity & Liabilities 2002 2001

Share Capital 200 200

Retained Earnings 310 220

Total Equity 510 420

Current Liabilities

Creditors & Accruals 970 470

Bank Overdraft 390 110

Taxation 110 100

Total Liabilities 1,470 680

Equity & Liabilities 1,980 1,100


Income Statements (Ugx. ‘000)
Item 2002 2001

Sales Revenue 1,500 1,000

Cost of Sales (700) (300)

Gross Profit 800 700

Admin & Distribution Expenses (400) (360)

Net Profit before Tax 200 170

Income Tax Expense (90) (70)

Net Profit after Tax 110 100


Ratio Analysis (2002 vs 2001)

• ROCE (Return on Capital Employed): 78.4% (2002), 80.9% (2001)
• Profit Margin: 26.7% (2002), 34.0% (2001)
• Asset Turnover: 2.94 (2002), 2.38 (2001)
• Current Ratio: 0.75:1 (2002), 0.74:1 (2001)


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