Profitability – how profitable the firm is in relation to sales and assets. Liquidity – ability of a company to pay its creditors and meet its debts. (ideal current ratio is 1.5-2.0 If more, then firm shud aim at reducing some asset. Much of it cud have been tied up in stocks ) Efficiency – how well the firm is using its resources. gearing ratio - expresses the ratio between borrowed capital and total capital employed. It is a measure of efficiency to help interpret the degree to which the activities of the firm are too tied up in loans that have to be financed and returned Both profit margins have improved, indicating an improvement in performance of Gadgets2u.com. This has been caused by both cost of goods sold and overheads falling as a proportion of turnover. This may have been caused by • better prices negotiated with suppliers as sales have grown enabling them to cut the cost of goods sold (purchasing economies of scale) • overheads being spread over a greater level of sales, hence reducing the unit cost • improved systems being developed to help improve productivity and therefore lower costs • any other relevant point. However, the net margin has improved by considerably more than the gross margin and this may indicate: • overheads being spread over a higher level of turnover. Overheads associated with the new e-commerce system may have stayed fairly steady as the system has spare capacity for growth. This would help reduce overheads per unit • the case study mentions higher staff workloads and this may reduce sales and admin overheads per unit • the growth in sales has not been accompanied by an increase in space used for admin and sales or stock storage and so they may have been able to spread these overheads over a higher level of sales, reducing overhead cost per unit • any other relevant point.