Ratios for business

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Ratios for business is an important part of the NUMERACY SKILLS FOR BUSINESS: FREE COURSE and Accounting Trainees and Bookkeepers need to understand ratios.

Bookkeepers and Accounting Trainees use ratios all the time. You’ll often hear them talk of liquidity ratio or the Gross Profit Mark-up ratio. But don’t let the fancy titles deceive you, ratios are very similar to fractions.
Let’s consider an example:
A manager spends two-thirds of his time in department X and the remainder of his time in department Y. Therefore his time is allocated in the ratio of 2:1 (pronounced 2 to 1). The manager’s time is split into three parts and 2/3 in X and 1/3 in Y. If his annual salary is £30,000 then this could be allocated between the two departments as follows:

£20,000 to X, and

£10,000 to Y

Now it’s your turn to calculate ratios for business.

A business employs a manager on £50,000 and he allocates his time between departments A, B and C in the ratio 2 : 3 : 5. How much of his salary of £50000 should be apportioned to each department ?

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