RETURN ON CAPITAL EMPLOYED (ROCE):
NET PROFIT/CAPITAL EMPLOYED*100
= 2,000/10,000*100 = 20%
This tells the business that 20% of all money being put into the business by its owners is being earned back in profit.
CURRENT RATIO:
CURRENT ASSETS/CURRENT LIABILITES
=5,000/1,000 = 5
This is called a liquidity ratio and measures the ability of the business to pay back its debts with cash, or near cash. A ratio of 5 means that the business will find it very easy to meet its liabilities. The usual ratio is between 1 and 2.