V. Find words with the following meanings

1. the ability to sell an asset for cash

2. how well a business uses its assets

3. the relationship between two figures

4. how casily a business can pay bills or debts when they are due

VI. Make word combination using a word from each box. One word can be used twice. Then use the word combinations to complete the sentences below. Look at the texts to help you

acid current dividend liquid quick

assets cover ratio test

1. ……………. consist of cash and things that can be easily sold and converted to cash.

2. A high ……………. Shows that the company is retaining a lot of money belonging to its shareholders.

3. The ………….. …………… or ……………. ……………. doesn’t count stock or inventory because this might be difficult or impossible to turn into cash.

4. The ……………. …………… shows a company’s ability to pay its short-term debts.

VII. Match the two parts of the sentences.

1. If a company pays out retained surpluses from past years

2. Some investors are worried that the new stock issue

3. A high current ratio indicates short-term financial strength but

4. Wall Street is on a historic price-earnings ratio of around 35, which

1. it does not measure how efficiently the company is utilizing its resources

2. its dividend cover will fall below 1,0

3. makes the marker very expensive, as the long-term average is 14,45

4. will dilute the company’s earnings per share

VIII. Over to you

Look at a company’s financial statements. Which of the financial ratios mentioned in this unit can be calculated:

from the balance sheet? using both these statements? Which ratios require additional information?

from the profit and loss account?

IX. Test your English

Complete the following words.

1. The profit expressed as a fraction or percentage

of the cost price M A R K – U P

2. The profit expressed as a fraction or percentage

of the selling price. M A _ _ _ _

3. A percentage of profits which they pay the

manager. C_ _ _ _ _ _ ION

4. Ratios help us to analyze and __________

accounting information. INT _ _ _ _ _ _

5. Shows that a firm has enough money to

survive in the short term. LI_ _ _D_ _ _

6. How quickly stock is turned over. STOCK_ _ _ _

7. The range of different types of goods which

a firm sells. SA_ _ _ M_ _

8. The sales figure minus any goods which

are returned. T_ _N_ _ _R

9. Shows if the firm can meet its debts in the

long term. S_ _V _ _ _Y

10. The amount of borrowing by a firm. G_ _R _ _G

11. The rate of return on an investment in shares. Y _ _ _D

12. Expenses which do not change even when

activities are increasing or decreasing. F _ _ _D

13. Expenses which change when the firm’s

activities change. V A R _ _ _ _ E

14. You can see this when information from

several years is compared. T R _ _ D

Key: 35 Ratios 1