Professional Documents
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MODULE 3 – RATIO
Ratio is applied not just in activities that involve simple day-to-day comparison but
more importantly in business comparative analysis. Ratio analysis is one of the techniques
that it used in financial statement analysis. Ratios are computed from a company’s financial
statements such as balance sheets and profit and loss statements to provide users relevant
information about the company’s liquidity, use of leverage, asset management, cost control,
and profitability and growth.
For instance, the ratio of number of boys in a class to the number of girls is 2:3.
Here, 2 and 3 are not taken as the exact count of the students but a multiple of them,
which means the number of boys can be 2 or 4 or 6…etc and the number of girls is 3 or 6
or 9… etc. It also means that in every five students, there are two boys and three girls.
Solution:
21 3
Men : Women = 21 : 28 = 3:4 or =4
28
28 4
Women : Total number of people = 28 : 49 = 4 : 7 or =7
47
21 3
Men : Total number of people = 21 : 49 = 3 : 7 or =
47 7
Example: A survey asked 130 students which between the subjects Accountancy and Marketing is
their preference. The result is given by the table below.
Response Solution
Accountancy 70
Marketing 60
Total 130
Write each of the following ratios as a fraction in simplest form.
a. students who prefer Accountancy to all students surveyed;
b. students who prefer Marketing to students who prefer Accountancy.
70 7
Solution: a. 70 to 130 (7 to 13) or 70:130 (7:13) or ( )
130 13
60 6
b. 60 to 70 (6 to 7) or 60: 70 (6:7) or ()
70 7
Example: A family of 5 people whose gross monthly income is PhP 30,000 budgeted the following
amounts for their major monthly expenditures:
House Rent Php 8,000
Food Php 6,000
Electricity Php 2,000
Others Php 1,000
8,000 8 4
Solutions: a. 6,000 = 6= or 4:3 or 4 is to 3
3
6,000 6 1
b.30,000 = 30 = 5 or 1:5 or 1 is to 5
2,000 2 1
c. = = or 1:3 or 1 is to 3
6,000 6 3
1,000 1
d. =30 or 1:30 or 1 is to 30
30,000
A rate is a special ratio of two numbers with different units of measurement such
as kilometers per hour, words per minute, or price per kilogram. To drive 600 km in 12 h is
to drive at the rate (or speed) of 50 km/h (or kph). To type 180 words in 3 minutes is to
type at the rate of 60 words per minute. These examples express how long it takes to do
something. By converting the ratio to a fraction with a denominator of 1 unit gives the unit
rate of doing something. Similarly, products from different manufacturers are packed in
different grams or units per pack. This practice makes it difficult for consumers to
compare prices of the same product to different manufacturers unless they take time
computing the unit price.
Example: The ABC Academy has 35 teachers that handle 1,260 students. What is the unit
rate or the number of students per teacher?
To find the unit rate, make the denominator 1 by dividing it by 35, and then divide
the numerator by the same number.
1,260 ÷35 36
=
35 ÷35 1
The unit rate is 36 students per teacher. This means that 1 teacher is assigned to
every 36 students.
(Source: Solano, Irene, et.al. (2020). Business Math. Philippines: Diwa Learning Systems, Inc. p. 39 - 45 )
1. Liz and Beth are cousins and they have decided to become business partners. They
have agreed that Liz will invest P250,000, and Beth will invest P400,000. The
profit from this business venture will be divided based on the ratio of their
investments. What is the ratio of their investments which will be used later as
basis in the distribution of profit?
2. A company’s accounting manager is reviewing the budget for next year and
calculating some ratios. He wanted to know the firm’s ability to pay its short-term
debt by determining its current ratio. What is the firm’s current ratio if it has
current assets of P1,550,000 and current liabilities of P1,240,000? Will the
company have the ability to pay its short-term debt?
4. Worker A receives P1,792 for his day’s work of 8 hours, and worker B receives
P1,500 for his half day’s work of 4 hours. Because their working hours vary, it is
difficult to compare the wages received by the two workers on the basis of their
take-home pay for the day. However, a comparison of their take-home pay is
possible using a basic unit rate, which is their hourly rate. So, what is their unit
wage or rate per hour? Assuming worker A and worker B are doing the same task
and have no other difference in their working condition, who gets a better pay?
5. You need paper plates for the event you are organizing. So, you went shopping and
found several options with the following prices:
Brand A: P49.50 per pack (100 pcs.)
Brand B: P24.00 per pack (50 pcs.)
Brand C: P12.25 per pack (25 pcs.)
Brand D: P11.50 per pack (24 pcs.)
Assuming all these brands have the same quality and have all the requirements
that you need for a paper plate, which brand is the best buy if you need 2,000 pieces?