B5 Profitability and liquidity GapFill

There is a difference between cash and  productionprofitinterestflow in a business. This is because one is inflows and outflows throughout the year, while the other is calculated at the end of the year. 

Profit is calculated to show both gross and  newoverallannualnet profit figures. Liquidity refers to the amount of cash available to meet  incomecustomerssuppliersdebts in the business. It is important that new business owners do not mistake  turnovertaxationloansexpenses for profit, as this will give them a misleading impression of their business success.

Calculations of profit margins are expressed as  percentagesratiosdecimalsnumbers which allows figures to be compared with  businesspotentialpreviousother years. The gross profit margin shows the impact of changes in  incomeresearchprofitrevenue and the gross profit. The net profit margin compares net profit with revenue. 

The current ratio is calculated by dividing current assets by  currenciesdebtscurrent liabilitiesexpenses. The liquid capital ratio removes  amountinvestigationsinventoryinterest, sometimes called stock, from the current ratio calculation. It's a good indicator whether the business could repay all their current liabilities very quickly.