Accounting: Ratio Interpretation

1. Sales Growth: An Increase is good unless:
1. Profit margins are shrinking
2. Growth in asset investment is greater
3. Credit control is worsening
4. Signs of over-trading are present! 
5. Growth isn't converted into cash!
2.  Ratios are a tool for comparison and for questions
3. Corporate Valuation Examples
1. ABC plc (a non-quoted company)
2. Non-current Assets (£M) 80
3. Current Assets 45
4. Current Liabilities 28
5. Non-current liabilities 40
6. Equity: share capital (£1 shares) 10
7. Retained Earnings £47
8. Total 125
4. The following of ABC's assets have market value in excess of their balance sheet value
1. Property B/S value= 30, Market = 40
2. Inventory value=15, Market=30
5.  What is the Book Value?
1. Look at the B/S
2. Book Value = Equity / Number of Issued Shares
3. Equity = RE + SC = 57
4. Number of Shares = 10
5. £5.70 per share