Performance Indicators
Profitability, liquidity, efficiency, gearing and investor ratios with interpretation and limitations.
How to study the ATT Qualification
Use Finance Act 2025 for the 2026 tax papers, complete the three foundational CBEs early, apply professional ethics throughout and concentrate option practice on the one paper you will enter.
Core concepts
Concept 1
Ratios convert statement figures into indicators of performance, position and risk.
Exam cue: Use consistent definitions and periods.
Concept 2
Interpretation needs comparisons, business context and the drivers behind movements.
Exam cue: Compare movement or benchmark and explain the likely driver.
Concept 3
Accounting policy, seasonality and one-off items can limit conclusions.
Exam cue: Connect the ratio to the user's decision and limitation.
Risk pitfalls and guardrails
Calculating a ratio without interpreting it.
Guardrail: Do not use an obsolete tax rate, assume a relief, ignore legal form, submit unsupported information or omit the relevant deadline and ethical response.
Comparing inconsistent definitions.
Guardrail: Do not use an obsolete tax rate, assume a relief, ignore legal form, submit unsupported information or omit the relevant deadline and ethical response.
Assuming improved profit means improved liquidity.
Guardrail: Do not use an obsolete tax rate, assume a relief, ignore legal form, submit unsupported information or omit the relevant deadline and ethical response.
Memory anchors
Profitability
Relate profit to sales or resources employed.
Liquidity
Assess ability to meet short-term obligations.
Efficiency
Evaluate how quickly working-capital resources turn.
Gearing
Assess debt exposure relative to equity or capital.
Ratio story
Movement, driver, consequence, benchmark and limitation.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
A shop retained £150,000 after deducting cost of sales from £500,000 revenue. Express that subtotal as a percentage of sales. What margin results?
Profit before interest and tax is £60,000 on revenue of £400,000. What is the operating profit margin?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
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