11 mark
A trader provides the following information.
$ | |
opening inventory | 9 000 |
purchases | 121 000 |
closing inventory | 15 000 |
What was the rate of inventory turnover?
4.79
5.42
9.58
10.83
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Accounting Ratios (Cambridge (CIE) IGCSE Accounting)
Exam Questions
18 mins18 questions
21 mark
Ben is the sales manager at a display lot for garden sheds. He is paid based on the number of sheds sold.
Which accounting ratio will be relevant to Ben?
gross margin
profit margin
rate of inventory turnover
trade receivables turnover
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31 mark
Which one of the following is not a limitation of inter-firm comparison?
Accounting records do not contain information about the skills of the workforce
Businesses may have been operating for different amounts of time
Businesses may set different sales prices for the goods they sell
The financial periods may be different for different businesses
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41 mark
Aalim is considering selling goods to another business on credit.
Why would he be interested in the financial statements of that other business?
to know if the business would be able to pay what it owed
to know the amount owed by the business in trade receivables
to know the business's profit for the year
to know the value of the business's inventory
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11 mark
A number of potential investors are considering purchasing shares in a limited company.
What information would be of interest to these potential investors?
1 the price of the shares
2 the expected future profits of the company
3 the expected rate of dividend the company might pay
4 when the company will pay back any money invested
1, 2 and 3
1, 2 and 4
1 and 3 only
2 and 3 only
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21 mark
The following is the list of balances for a company at 31 August 2024.
$ | |
cash in hand | 375 |
bank loan - repayable 30 November 2024 | 2 500 |
bank loan - repayable 31 January 2026 | 4 000 |
bank overdraft | 250 |
trade receivables | 9 200 |
trade payables | 5 800 |
other receivables | 300 |
other payables | 105 |
inventory | 21 000 |
What was the current ratio?
1.14 : 1
2.44 : 1
3.57 : 1
5.02 : 1
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31 mark
A trader notices that her gross margin this year has decreased when compared with the gross margin last year.
Which of the following could be a reason for this?
Administrative expenses have increased compared with last year.
A greater rate of cash discount has been allowed compared with last year.
A greater rate of trade discount has been allowed compared with last year.
Depreciation of equipment has increased compared with last year.
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41 mark
Which of the following changes might a business make in order to reduce its liquid (acid test) ratio?
Reduce bank overdraft
Reduce inventory
Reduce other payables
Reduce trade receivables
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51 mark
The following table contains accounting ratios relating to the businesses owned by Awinita and Tokala.
Awinita | Tokala | |
liquid (acid test) ratio | 1.2 : 1 | 0.9 : 1 |
current ratio | 2.1 : 1 | 2.5 : 1 |
Which of the following statements are correct?
1 Awinita has insufficient current assets to meet her current liabilities.
2 Awinita can meet her current liabilities from her liquid assets more easily than Tokala.
3 Tokala has sufficient liquid assets to meet his current liabilities.
4 Tokala can meet his current liabilities from his current assets more easily than Awinita.
1 and 2
2 and 3
2 and 4
3 and 4
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61 mark
Arvan took out a long-term bank loan and used some of the funds to to pay some of his credit suppliers early.
How did this affect his business's return on capital employed (ROCE) and trade payables turnover (days)?
return on capital employed (ROCE) | trade payables turnover (days) | |
|---|---|---|
A | decrease | decrease |
B | decrease | increase |
C | increase | decrease |
D | increase | increase |
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71 mark
Madison provided the following information about her trading business.
$ | |
for the year ended 31 October 2024 | |
revenue: cash sales | 191 000 |
revenue: credit sales | 267 000 |
at 31 October 2024 | |
trade receivables | 20 480 |
other receivables | 3 200 |
What was Madison's trade receivables turnover?
17 days
19 days
28 days
33 days
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81 mark
Hypatia owns and operates a bookshop. Which actions could she take to improve her rate of inventory turnover?
increase the selling price of all her books
offer discounts on books over a year old
pay her book suppliers as quickly as possible
1, 2 and 3
1 and 3 only
2 only
3 only
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91 mark
A trader provided the following information for the year ended 31 December.
$ | |
total cash and credit purchases of goods for resale | 240 000 |
cash purchases of goods for resale | 23 000 |
credit purchases of non-current assets | 35 000 |
Her trade payables at that date were $16 000.
What was the trade payables turnover?
22 days
25 days
27 days
29 days
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11 mark
Aryana, a sole trader, provides the following information for her business.
credit sales | $48 000 |
cash sales | 20% of total sales |
net profit margin | 25% |
How much is the net profit?
$9 600
$12 000
$14 400
$15 000
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21 mark
A business provides the following information.
liquid (acid test) ratio | 2.2 : 1 |
current liabilities | $15 000 |
inventory | $8 000 |
What is the value of the current assets?
$17 600
$25 000
$33 000
$41 000
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31 mark
The table shows the gross margin and profit margin for businesses owned by four different people.
Owner | gross margin % | profit margin % |
Aiyana | 39 | 18 |
Bidziil | 36 | 17 |
Chayton | 34 | 16 |
Doli | 31 | 11 |
Which owner's business controls its overheads most efficiently?
Aiyana's
Bidziil's
Chayton's
Doli's
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41 mark
The following information is for the company WWL Limited.
$ | |
net profit before interest | 43 100 |
profit for the year | 41 000 |
equity at the year-end | 210 000 |
6% debentures | 35 000 |
What was WWL Limited's return on capital employed?
16.73%
17.59%
19.52%
20.52%
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51 mark
Yakub made credit sales of $120 450 in each of the years 2022 and 2023.
In 2023, his trade receivables turnover was exactly three days longer than it had been in 2022.
What was the change in his total trade receivables in 2023?
$110 decrease
$110 increase
$990 decrease
$990 increase
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