Observation

Few candidates who attempted this question which was on explanation of terms in Accounting Ratios performed poorly. The expected answers include:

(a)        Working capital:
This is the capital of a business which is used in its day-to-day operations.                                                                                                                         
It is also described as theexcess of current assets over current liabilities;                                                                                                                                                     
(b)        Capital employed:
This is the total amount of capital used for generating profits.   
It is described as the sum of fixed assets and working capital or the excess
of total assets over current liabilities.

            (c)        Fixed assets:
These are the resources or properties owned by an organization which are not meant to be sold and expected to last for more than one year;             

(d)       Current assets:
These are resources acquired by an organization to be used within one yearand can easilybe converted into cash;                                                      
(e)          Rate of stock turnover:
This ratio measures the average length of time that stock/inventory is kept before it is used upor sold out.                                                                     
It is described as cost of goods sold divided by the average stock.