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Diploma in Higher Education Studies

Ratios: how profitable is the business?

HES 201 · Introductory Accounting — Week 13 of 16

CourseHES 201
Week13 of 16
SemesterII
TutorOnline in the course chat

This week’s topics

Ratios: how profitable is the business?

  1. Gross profit margin
  2. Net profit margin

What you will be able to do

  • 4.1 Calculate simple liquidity and profitability ratios.
  • 4.2 Explain what the ratios indicate about business health.

Activity

Calculate and compare the margins of two businesses.

Study materials

Further resources

  • Principles of Finance 2e, ch. 6.6: Profitability ratios · PDF · OpenStax (2026), gross and net profit margin; pp. 177–181 · for registered students
  • Introduction to Business 2e, ch. 14.7: Analysing financial statements · PDF · OpenStax (2026); pp. 492–495 · for registered students
  • Price-setting behaviour in Belgium: what can be learned from an ad hoc survey? · Open-access article · Aucremanne & Druant (2005), National Bank of Belgium Working Paper 65. Firms set prices as cost plus a percentage mark-up: the link to profit margins. · for registered students
  • Monitoring, Supervision and the Use of Accounting Ratios in Irish Credit Unions · Open-access article · Hyndman & McKillop (2006), Irish Accounting Review. Real example of a ratio scheme (PEARLS) used to judge liquidity, profitability and safety. · for registered students
Materials marked “for registered students” open in the student portal, which is set up as soon as you receive final acceptance.
Week 12Week 14
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Course plan
  • Week 1: Why businesses keep financial records
  • Week 2: Who uses accounts?
  • Week 3: Income, expenses and profit
  • Week 4: Assets, liabilities and capital
  • Week 5: The accounting equation
  • Week 6: Double entry: debits and credits
  • Week 7: Recording sales, purchases and cash
  • Midterm: Midterm evaluation
  • Week 9: The income statement (profit and loss)
  • Week 10: The balance sheet
  • Week 11: Profit is not the same as cash
  • Week 12: Cash flow forecasts
  • Week 13: Ratios: how profitable is the business?
  • Week 14: Ratios: can the business pay its bills?
  • Week 15: Review and coursework completion
  • Final: Final assessment and submission
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