From the figures given below for 2009 calculate the following for CES Ltd.: (i) Net profit margin; (ii) Current ratio; (iii) Acid Test ratio; (iv) Debt Equity ratio - Leaving Cert Business - Question B - 2010

The current ratio can be calculated using the following formula:

$Current ext{ } Ratio = \frac{Current ext{ } Assets}{Current ext{ } Liabilities}$
For CES Ltd.:

$Current ext{ } Ratio = \frac{84,500}{65,000} = 1.3:1$
This indicates that for every £1 of liability, the company has £1.3 of assets.

The acid test ratio is calculated by the formula:

$Acid ext{ } Test ext{ } Ratio = \frac{Current ext{ } Assets - Closing ext{ } Stock}{Current ext{ } Liabilities}$
For CES Ltd.:

$Acid ext{ } Test ext{ } Ratio = \frac{84,500 - 39,000}{65,000} = \frac{45,500}{65,000} = 0.7:1$
This shows the company's ability to pay its current liabilities without relying on the sale of inventory.

The debt equity ratio can be calculated using the formula:

$Debt ext{ } Equity ext{ } Ratio = \frac{Debt}{Equity} \text{ where } Equity = Ordinary ext{ } Share ext{ } Capital + Retained ext{ } Earnings$
For CES Ltd.:

$Equity = 30,000 + 20,000 = 50,000 \text{ and } Debt = 192,000 \text{ (Long Term Debt)}$
Thus,

$Debt ext{ } Equity ext{ } Ratio = \frac{192,000}{50,000} = 0.6:1$
This signifies the proportion of debt to equity utilized by the company.