Explanation

(a) Users of accounting information

(i) Management
(ii) Employees
(iii) Government agencies
(iv) Investors
(v) Bankers/lenders/debenture holders
(vi) Customers/debtors
(vii) Suppliers/creditors
(viii) Trade Unions
(ix) Trade Associations
(x) General Public
(xi) Shareholders/owners/employers
(xi) Financial analysts
(xii) Auditors

(b) Formula and use of ratios

(i) Quick Ratio: Current assets - Inventory
                              Current liabilities

This ratio is used to measure the ability of a business to pay its short-term debts from current assets, after eliminating inventories.

(ii) Net profit margin: \(\frac{\text{Net profit x 100}}{ sales}\)

This ratio is used to determine the net profit earned on each naira of sales made by the business.

(iii) Total assets turnover = \(\frac{\text{sales x 100}}{\text{total assets}}\)

This is ratio is used to measure how efficiently a business can use its assets to generate sales

(iv) Creditors payment period (in days) = \(\frac{\text{trade creditors x 365 days}}{\text{credit purchases}}\)

The ratio measures on average, the number of days that the business takes to pay its trade creditors/people it owes.

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