Business studies about analysis of account ratio

[wang52850981]

1.What does the Return on capital employed shows about?
2.what do gearing ratio show about
3.what are the importance of break-even chart and cash flow forecast to stakeholders?

 

[nachiketgandhi]

1). Return On Capital Employed is Net Profit/Capital Employed *100%.
2). The gearing of a business is the ratio of long-term loans to the capital employed.
3). Break-Even : 1. Managers are able to read off from the graph the expected profit or loss to be made at any level of ouput. 2. The impact on profit or loss of certain business decisions can also be shown by redrawing the graph. What would happen to the break-even point and the maximum output level if the manager decided to increase the selling price to $x per pair? This new situation can be shown on another break-even chart. 3. The break even chart could be used to show the safety margin - the amount by which sales exceed the break-even point. In the graph above, if the firm is producing 1,000 units, the saftey margin is 167 units.
Cash Flow Forecast : Cash Flow Forecast could be used to tell the Manager : 1. How much is available for paying bills, repairing loans or for buying fixed assets.2. How much the bank might need to lend in order to avoid insolvency.3. Whether the business is holding too much cash which could be put to a more profitable use.4. Can also be used to help them find the future cash (FINANCIAL) position of their business.5. Starting up a business.6. Running an existing business.7. Keeping the bank manager informed.8. Managing cash flow.