Gross Profit Margin (%): how well a company converts sales into gross profit.

The percentage of how much profit you have to

earn from the capital employed. The higher the %, the more efficient the business is with its capital employed.

Net Profit Margin (%): how well a company converts sales into net profit. Shows the percentage of gross profit per $1 worth of
goods. If the following year's profit increases, either the price increases or the cost of sales is reduced.

Return on capital employed: how profitable a company is compared to the money used. Shows the net profit made on each
$1 Worth of sales. The higher the results, the more net profit is gained from the sales.

One profitability ratio isn’t helpful by itself. You need to use all the profitability ratios and compare them with previous years
of the business.

Liquidity Ratios: Current Ratio: how good a company is to pay off its current liabilities with its current assets. Shows whether
the business has enough current-term assets to pay off short-term debts; if less than 1 means the business does not have
money,1 is when a business can exactly pay debts, and when more than 2 means it has excessive assets that could be put to
use.

Acid Test Ratio: measures the ability of a company to pay off its liabilities without depending on the inventory sales. The acid
ratio considers only the liquid assets of the business, not the inventories. The uses as the current ratio.

Managers They will help them keep control over the performance of each product.
Help decision-making
Ratios are a quick way for managers to compare their ratings with other businesses and previous accounts.

Shareholders and potential investors want to know how big a profit/ loss the company has made.
They will want to check the profitability and liquidity ratios and decide whether shareholders have to buy more shares.

Creditors/Trade Payable Liquidity ratios indicate the ability of the company to pay back its debts.

Banks Risk of illiquid, no lending.

Government: To check Tax Revenue