Business Accounting Ratio analysis is one of the many tools that can Essay

Business Accounting Ratio compend is one of the many tools that can be employ to evaluate financial performance of business entities - essay ExampleHaving produced 137.2 million barrels of oil equivalent for one year as of the fiscal year ended June 30, 2009, BHP is not surprising selling its crude oil production to refiners worldwide at grocery store prices (Reuters.com, 2010a).The following ratios argon needed for purposes of evaluating BHP Gross Profit/Profitability ratio, Return on Capital Employed. caravan Ratio, Liquidity ratio/acid test ration and Price earnings ratio. Each is regardd and explained below apply info from The Annual Report of BHP for 2009 (BHP, 2010) and London Stock Exchange (2010).Return on equity (ROE) is computed by dividing Net income to Total Equity, Return on Sales or Net Profit Margin is computed by dividing Net income to Total Revenues, while Gross Profit ratio is from dividing gross profit with Total Revenues. The data used to compute the rat ios are found in Appendix A.This also measures the companys gainfulness and efficiency of the company for the knightly two years. The formula is to Earnings before tax (EBIT) as numerator and to bring Capital Employed, which is equivalent to Total Assets less circulating(prenominal) liabilities as denominator. Below is the resulting ratio. The data used to compute the ratios are found in Appendix A.This also measures the companys financial leverage for the past two years by dividing Total liabilities to Total equity. Below is the resulting ratio. The data used to compute the ratios are found in Appendix A.This measures the companys capacity to pay its maturing obligations for the current year. This current ratio is computed by dividing Current assets to Current liabilities while Acid test ration is by dividing Quick assets to Current liabilities. Quick assets equals current assets less inventory, prepaid expenses and other current assets. Below are the resulting ratios. The data used to compute the ratios are found in Appendix AThis measures the