Which ratios will each of these groups be interested in?

On this page you should complete the table below (you can do this by printing it out). In the left hand column there is a list of interest groups one by one. Your job is to complete the right hand column by giving two or three examples of ratios they might be interested in.

We have given an example of each to help you get started.

When you've filled in the gaps you will appreciate that it gives us some ideas about the ratios that each of the users we have identified would be interested in looking at.

Interest Group	Ratios to watch
Investors	Return on Capital Employed
Lenders	Gearing ratios
Managers	Profitability ratios
Employees	Return on Capital Employed
Suppliers and other trade creditors	Liquidity
Customers	Profitability
Governments and their agencies	Profitability
Local Community	This could be a long and interesting list
Financial analysts	Possibly all ratios
Environmental groups	Expenditure on anti-pollution measures
Researchers	Depends on the nature of their study

Brief Review of the Accounts

It's all very well being armed with a list of ratios and people who might want to use them, but we need to know where to get all the figures to put into those ratios, don't we?

Here's a reminder of the layout of a basic profit and loss account and of a basic balance sheet; we will look at more advanced versions later if we need to. If it helps, why not print out these financial statements and have them alongside you as you work through the ratios?

These accounts, for Tesco plc, the retailing giant, also show two sets of titles: the titles on the left show the titles that you might be familiar with from your text books; the titles on the left are the ones we can find in published reports and accounts for a business. We have highlighted the terms and phrases that might be different in your books compared to published accounts. We will use these different terms almost constantly so you do need to read and understand them. We have highlighted the differences for you in this table: (ahhh, aren't we kind?)

Tesco plc
Text book version		Annual Report and Accounts Version
Consolidated profit and loss account	23 Feb 02	Consolidated profit and loss account
for the year ended	£m	for the year ended
Sales	23,653	Turnover
Cost of Sales	-21866	Cost of sales
Gross Profit	1,787	Gross profit
Operating Expenses	-465	Operating expenses
Net Profit before other income/costs	1,322	Operating profit
Other income/costs	32	Other costs/income
Net Profit before interest and taxation	1,354	Profit before interest and taxation
Net interest receivable (payable)	-153	Net interest receivable (payable)
Net Profit on ordinary activities before taxation	1,201	Profit on ordinary activities before taxation
Tax on profit on ordinary activities	-371	Tax on profit on ordinary activities
Net Profit on ordinary activities after taxation	830	Profit on ordinary activities after taxation
Equity minority interests	0	Equity minority interests
Profit for the year	830	Profit for the financial period
Dividends	-390	Dividends
Retained profit	440	Retained profit
Tesco plc
Text book version		Annual Report and Accounts Version
Consolidated balance sheet	23 Feb 02	Consolidated balance sheet
Fixed assets	£m	Fixed assets
Intangible Assets	154	Intangible Assets
Tangible assets	11,032	Tangible assets
Investments	317	Investments
Total Fixed Assets	11,503	Total Fixed Assets
Current assets		Current assets
Stock	929	Stock
Debtors	454	Debtors due within one year
Short term investments	225	Short-term investments
Cash at bank and in hand	445	Cash at bank and in hand
Total Current Assets	2,053	Total Current Assets
Creditors	-4,809	Creditors: Amounts falling due within one year
Working Capital	-2,756	Net current assets (liabilities)
Total assets less current liabilities	8,747	Total assets less current liabilities
Long Term Liabilities	-2,741	Creditors: Amounts falling due after more than one year
Provisions for liabilities and charges	-440	Provisions for liabilities and charges
Net assets	5,566	Net assets
Represented by		Capital and reserves
Ordinary share capital	350	Called-up share capital
Share premium	2,004	Share premium
Other reserves	40	Other reserves
Profit and loss account	3,136	Profit and loss account
Ordinary shareholders' funds	5,530	Equity shareholders' funds
Minority interests	36	Minority interests
Capital Employed	5,566	Total capital employed

Source:
http://www.bized.co.uk/