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Concept Introduction:
Gross margin ratio:
Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.
Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.
Acid-test ratio:
Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.
Requirement 1:
Gross profit margin ratio and net profit margin ratio.
Concept Introduction:
Gross margin ratio:
Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.
Current ratio:
Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.
Acid-test ratio:
Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.
Requirement 2:
Current and acid-test ratio.
Concept Introduction:
Gross margin ratio:
Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.
Current ratio:
Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.
Acid-test ratio:
Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.
Requirement 2:
Current and acid-test ratio.
Concept Introduction:
Gross margin ratio:
Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.
Current ratio:
Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.
Acid-test ratio:
Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.
Requirement 3:
Debt ratio and Equity ratio.
Concept Introduction:
Gross margin ratio:
Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.
Current ratio:
Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.
Acid-test ratio:
Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.
Requirement 4:
Percent of current and long-term assets.
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Chapter 17 Solutions
Fundamental Accounting Principles
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