Accounting 9706 · AS & A Level
Analysis and communication of accounting information
100 practice questions on Analysis and communication of accounting information, with worked solutions and instant marking.
What does the return on capital employed ratio measure?
Feb/March 2016
These ratios were worked out for two businesses, each with revenue of $100000$. Gross margin: X $20\%$, Y $25\%$. Profit margin: X $10\%$, Y $10\%$. In what way do the cost of sales and expenses of X compare with those of Y?
Feb/March 2016
The trial balance for Seema Limited for the year ended 30 June 2015 contains the following figures.
Feb/March 2016
The table sets out year-end figures for a company. Income statement figures: Operating profit: $14000$ Finance costs incurred: $(1500)$ Loss arising on disposal of non-current asset: $(2500)$ Profit for the year: $10000$ Statement of financial position details: $5\%$ debenture 2020: $30000$ Ordinary share capital recorded at: $70000$ Share premium account: $15000$ Retained earnings: $35000$ Calculate the return on capital employed (ROCE).
Feb/March 2017
A business supplied this information. Revenue for the year: $390000$ Non-current assets at cost at the end of the year: $260000$ Accumulated depreciation at the end of the year: $65000$ Calculate the non-current asset turnover.
Feb/March 2017
Razia was a sole trader who launched her business on 1 July 2015, selling ladies’ clothing. She did not maintain proper books of account, but she could provide the information below.
Feb/March 2017
The following figures have been taken from a business’s financial statements. Revenue $=135000$, total capital employed $=575000$, non-current assets $=180000$. Calculate the non-current asset turnover.
Feb/March 2018
X Limited’s statement of financial position as at $31$ December $2017$ gives the following amounts (in $\$000$): non-current assets $1350$, current assets $140$, ordinary share capital $900$, general reserve $150$, $10\%$ debentures $200$, current liabilities $90$, retained earnings $150$. The profit from operations for the year was $65000$ and the finance costs were $20000$. What is the return on capital employed for $2017$?
Feb/March 2018
Which item would cause the expenses to revenue ratio to fall?
Feb/March 2019
The following information was supplied by a company. Operating profit $109000 Interest charges paid $12000 Issued share capital $250000 Overall reserves $129000 $5\%$ debentures amounting to $60000 Calculate the return on capital employed (ROCE) to two decimal places.
Feb/March 2019
The balances listed below were taken from the books of K Limited at 30 September 2018.
Feb/March 2019
A company’s annual results showed credit sales of $500{,}000. The trade receivables collection period was $73$ days. In the following year, credit sales were forecast to be $550{,}000 and the collection period was expected to remain unchanged. What percentage change is expected in trade receivables?
Feb/March 2020
A business has these current assets and current liabilities. trade receivables $6000$ bank overdraft $1500$ cash in hand $50$ trade payables $5050$ Inventory is the only other item included in working capital. The current ratio is $2:1$. What is the value of the inventory?
Feb/March 2020
Why does a business draw up budgets?
Feb/March 2020
At the close of his first year of trading, the trader’s entire inventory was destroyed in a fire. He knows the values of sales and purchases and wants to work out the value of the inventory that was lost. Which ratio should he use?
Feb/March 2021
Which ratio can a business use to judge whether it is able to meet its immediate cash needs?
Feb/March 2021
At the close of its financial year, the following details were available for a business. inventory $20000$ bank $8400$ credit trade receivables $35000$ trade payables $15000$ rent receivable in arrears $3000$ The business also had a 5-year bank loan of $20000$ to be repaid in equal annual instalments. What was the value of the current ratio?
Feb/March 2021
The directors of B Limited have supplied the information below.
Feb/March 2021
Which of these statements are correct?
Feb/March 2022
What could lead to a fall in a company’s non-current asset turnover?
Feb/March 2022
The following data for a limited company as at 31 December 2021 are available: Ordinary share capital: $300\,000. Retained earnings: $110\,000. $8\%$ debenture: $100\,000. Retained earnings on 1 January 2021 amounted to $82\,000. An interim dividend of $45\,000 was paid on 1 May 2021. Calculate the return on capital employed for the year ended 31 December 2021.
Feb/March 2022
Which one of the statements is correct?
Feb/March 2022
A business records an inventory turnover rate of 17 times. What is the numerator used in the calculation?
Feb/March 2023
At 31 December, the year-end statement of financial position for X Limited shows the following figures: non-current assets $1350000 current assets $140000 ordinary share capital $900000 general reserve $150000 long-term loan $200000 current liabilities $90000 retained earnings $150000 For the year, profit from operations was $65000 and finance costs were $20000. Calculate the return on capital employed for the year.
Feb/March 2023
Which of the following statements is correct?
Feb/March 2023
Haniya wanted to compare several ratios for her business. Information is given for the year ended 30 November 2021 and an extract from the statement of financial position at 30 November 2022, together with credit sales and credit purchases for the year ended 30 November 2022.
Feb/March 2023
Jim is a manager in a limited company. He also holds a small number of its shares. Why has he been examining its latest financial statements?
Feb/March 2024
H Limited’s cost of sales over the latest two years (Year 2 and Year 1) is shown below: average inventory: Year 2 = 100 000, Year 1 = 65 000 credit purchases: Year 2 = 910 000, Year 1 = 760 000 cost of sales: Year 2 = 850 000, Year 1 = 750 000 Which statement about the efficiency of inventory turnover is the correct one?
Feb/March 2024
A company’s statement of financial position showed these items. Bank (debit balance) $300\,000$ Ordinary share capital $1\,000\,000$ Share premium $200\,000$ Revaluation reserve $100\,000$ General reserve $100\,000$ Retained earnings $400\,000$ What is the highest total dividend that the directors may recommend?
Feb/March 2025
Sunil was examining the statement of financial position of a business. The statement of profit or loss was not available. Why did Sunil want information about the current assets of the business?
Feb/March 2025
Which of these is not a limitation of accounting information?
Feb/March 2025
A company’s accounting period finishes on 31 December. By the close of Year 1, the company had equity funding of $850\,000$ and no long-term borrowings. At the start of Year 2, a $6\%$ debenture worth $150\,000$ was issued. The profit for Year 2 was $58\,000$ and dividends amounting to $20\,000$ were paid out. What was the return on capital employed for Year 2?
Feb/March 2025
A company has a bank balance of $20000. The company’s equity and reserves are shown. The directors want to pay the maximum dividend possible. What amount of the bank balance will be needed to pay the dividend?
May/June 2016
The company supplies the following information. What is the return on capital employed?
May/June 2016
When a business buys inventory with cash, how will liquidity ratios be affected?
May/June 2016
X sells goods on credit. To decide whether he wanted to do business with them, he examined the financial statements of two other businesses. X trades only with businesses whose trade payables turnover is 42 days or less. With which business(es) did X choose to trade?
May/June 2016
During a year, a company’s profit from operations increased by $10\%$, while its gross profit rose by only $5\%$. Which factors might explain this?
May/June 2016
A company aims to raise its return on capital employed in the short term. Which action would make this happen?
May/June 2016
Which item is counted in the current ratio but excluded from the liquid (acid test) ratio?
May/June 2016
A business has compiled the information below for the year ended 30 April 2015. What was the inventory turnover?
May/June 2016
The following data relate to a company: ordinary share capital $50000$, retained earnings at the end of the year $11000$, $8\%$ debentures $(2020-2022)$ $15000$, bank overdraft $8000$, profit from operations $17700$, profit for the year $16500$. Calculate the return on capital employed.
May/June 2016
A business buys inventory with cash. What effect will this have on liquidity ratios?
May/June 2016
X sells goods on credit. To decide whether to trade with them, he studied the financial statements of two other businesses. He discovered the following details. Business G recorded credit purchases of $21800 and trade payables of $2320. Business H recorded credit purchases of $49500 and trade payables of $5750. X trades only with businesses whose trade payables turnover is 42 days or less. Which business(es) did X choose to trade with?
May/June 2016
The information below has been taken from the financial statements of Thaw Limited at 31 December 2015.
May/June 2016
The data below have been taken from Thaw Limited’s financial statements as at 31 December 2015.
May/June 2016
On 1 May, a trader had all of his inventory destroyed in a fire. He knows the values for sales and purchases and wants to calculate the value of the inventory that was lost. Which ratio should he use?
May/June 2017
A business had the following figures available: equity: $90625$ non-current liabilities: $36250$ profit from operations: $24375$ profit for the year: $18125$ Calculate the return on capital employed.
May/June 2017
A business gave the following figures: cost of non-current assets: $525000$ net book value of non-current assets: $350000$ revenue: $800000$ profit for the year: $160000$ What is the non-current asset turnover?
May/June 2017
The sales for a company over a 365-day year are listed below: cash sales: $179580$ credit sales: $927100$ total sales: $1106680$ The trade receivables turnover stood at $42$ days. What was the amount of trade receivables at the end of the year?
May/June 2017
A company gives the information below. Profit from operations $16000$. Finance costs $4000$. Ordinary share capital ($\$1$ shares) $50000$. Non-current liabilities $4000$. Retained earnings $20000$. Calculate the return on capital employed.
May/June 2017
A business has the following financial data. Every purchase and sale is carried out on credit. Purchases $121980$. Revenue $209980$. Trade payables $45448$. Trade receivables $28765$. What is the average collection period?
May/June 2017
The following items are shown in a statement of financial position. Inventory: $20000$ Balance at bank: $2000$ Cash in hand: $1500$ Trade payables: $11000$ Provision for doubtful debts: $500$ The current ratio is $3:1$. What amount do the trade receivables owe?
May/June 2017
The financial statements of a company give the figures below. Sales: $570000$ Cost of goods sold: $210000$ Operating expenses: $65000$ Non-current assets: $250000$ Capital employed: $310000$ What is the non-current asset turnover?
May/June 2017
The directors of AB Limited have supplied the financial details below.
May/June 2017
Wiggins has supplied the following summary financial information for the year ending 30 April 2017.
May/June 2017
Stapleton gave the information below for the year ended 30 April 2016.
May/June 2017
The information below has been taken from a business's financial statements. Income statement: Profit from operations: $48\,000$ Debenture interest: $(4\,550)$ Loss on disposal of non-current asset: $(3\,250)$ Profit for the year: $40\,200$ Statement of financial position: $7\%$ debenture: $65\,000$ Ordinary share capital: $95\,000$ Share premium: $7\,500$ Retained earnings: $35\,000$ Calculate the return on capital employed (ROCE).
May/June 2018
What factors would influence the current ratio of a business?
May/June 2018
The extract below comes from an income statement. revenue $180000$ cost of goods sold $(75000)$ distribution costs $(8000)$ administrative expenses $(22000)$ profit from operations $75000$ debenture interest $(2500)$ profit for the year $72500$ What was the ratio between operating expenses and revenue?
May/June 2018
The information below relates to the year ending 31 December 2017. revenue $640$ cost of sales $350$ machinery at net book value $120$ land and buildings at net book value $90$ motor vehicles at net book value $20$ current assets $50$ equity $210$ Calculate the non-current assets turnover.
May/June 2018
A company obtains finance by issuing debentures. What effect does this have on net current assets and short-term profits?
May/June 2018
Why could employees be interested in the financial statements of their employer?
May/June 2018
The information below has been supplied by a business. Cost of sales $240000$. Gross margin $25\%$. Profit for the year $16000$. What was the expenses to revenue ratio, correct to the nearest whole percent?
May/June 2018
At 31 December 2016, Anna has collected the following information about Ravi, who may become a new customer.
May/June 2018
Which ratio is used to work out the average length of time a business needs to pay its trade creditors?
May/June 2019
A company’s financial statements show the figures below: profit for the year: $245000$ finance costs: $120000$ preference share capital: $220000$ ordinary share capital: $850000$ general reserves: $140000$ retained earnings: $260000$ Calculate the return on capital employed (ROCE).
May/June 2019
A business has compiled the following figures for the year ended 30 April 2019. revenue: $220000$ inventory at the beginning: $25000$ purchases: $120000$ inventory at the end: $(31000)$ cost of goods sold: $114000$ gross profit: $106000$ What was the turnover of inventory?
May/June 2019
Why would a business draw up budgets?
May/June 2019
Which action would raise a company’s current ratio?
May/June 2019
The data below relate to the year ending 31 December 2018. Revenue $800000; cost of sales $175000; gross profit $625000; distribution costs $95000; administrative expenses $35000; profit from operations $495000; finance costs $5000; profit for the year $490000. What was the ratio of operating expenses to revenue?
May/June 2019
On 1 January 2018, a business forecast sales for the year ending 31 December 2018 of $450000. At that date, its non-current assets amounted to $306000. On 1 July 2018, it bought new machinery costing $180000 so that its sales would rise by a further $20000 each month. What was the rate of non-current asset turnover in 2018? (Ignore depreciation.)
May/June 2019
Which accounting ratio would not be suitable for judging a business’s capacity to settle its trade payables?
May/June 2019
A sole trader has given the following details: annual revenue $240000; average inventory $25000; mark-up $50\%$. What was the inventory turnover rate?
May/June 2019
Which changes would cause profit to fall?
May/June 2019
Financial statements supply users with information that helps them assess a business’s financial performance.
May/June 2019
Which ratio indicates to managers the length of time needed to collect payment for goods sold on credit?
May/June 2020
For G Limited, the information below relates to the year ending 31 December 2019. Share capital $275000, long-term bank loan $180000, current liabilities $120000, profit from operations $244000, bank loan interest $34000, retained earnings including profit for the year $400000. What was the return on capital employed?
May/June 2020
What is one aim of financial statements?
May/June 2020
The inventory turnover rate of a company has been worked out for two successive periods. in the current period $5.6$ times in the previous period $4.8$ times Several statements about this change are given below. Which statements could account for the change?
May/June 2020
The items listed below are included in a statement of financial position. inventory $20000$ cash and cash equivalents $3500$ trade payables $11000$ provision for doubtful debts $500$ The current ratio equals $3:1$. What amount do the trade receivables owe?
May/June 2020
Which ratio shows managers the length of time needed to collect payment for goods sold on credit?
May/June 2020
The following figures are given for G Limited for the year ended 31 December 2019: share capital $275\,000$, long-term bank loan $180\,000$, current liabilities $120\,000$, profit from operations $244\,000$, bank loan interest $34\,000$, retained earnings including profit for the year $400\,000$. What was the return on capital employed?
May/June 2020
What is one purpose of financial statements?
May/June 2020
Ayesha has supplied the following extracts from her business’s financial statements. All purchases are made on credit. Two-thirds of sales are on a credit basis.
May/June 2020
Which ratios are typically calculated to assess how efficiently a business operates? 1 current ratio 2 gross margin ratio 3 inventory turnover ratio 4 trade receivables turnover ratio
May/June 2021
The details below relate to a limited company at the end of its financial year. ordinary shares of $1$ each $400000 retained earnings (including profit for the year $94500$) $250000 $8\%$ debenture (2028) $100000 bank overdraft $20000 What is the return on capital employed?
May/June 2021
The trade receivables turnover ratio results for two companies are given below. Company X: $45$ days Company Y: $55$ days What can be inferred about Company Y?
May/June 2021
In 2019, a company’s non-current asset turnover ratio was $\frac{20200}{5100} = 3.96$ times. The following changes occurred during 2020. 1. Net revenue remained the same. 2. Discount allowed rose by $400$. 3. Depreciation was $1000$. 4. Purchases of non-current assets came to $1300$. What was the non-current asset turnover ratio in 2020?
May/June 2021
Which of the following statements are correct?
May/June 2021
A trader has kept a provision for irrecoverable debts for several years. He is now thinking about lowering the percentage rate used for that provision. Which ratios would be affected by this change?
May/June 2021
The data below are provided for a business for the year ending 31 December 2020: Rate of inventory turnover $20$ times Opening inventory $40\,000$ Closing inventory $20\,000$ Gross margin $25\%$ What was the revenue for the year ending 31 December 2020?
May/June 2021
Which of the statements are correct?
May/June 2022
Which ratios count as efficiency ratios?
May/June 2022
The information below is given for a limited company. Closing inventory: $30000$ Inventory rose by $50\%$ from the beginning of the year Inventory turnover rate: $8$ times Gross profit for the year: $200000$ What was the company’s sales revenue for the year?
May/June 2022
Which statement is not relevant to budgeting?
May/June 2022
The extract below is taken from a company’s statement of financial position at 30 September. Non-current assets $120\,000$ Inventory $35\,000$ Trade receivables $23\,000$ Cash at bank (debit balance) $12\,000$ Trade payables $15\,000$ Bank loan repayable within 12 months $40\,000$ What is the liquid (acid test) ratio?
May/June 2022
What action would raise the current ratio of a business?
May/June 2022
A business has the following information: Sales: $36000 Purchases: $21000 Inventory at 1 January 2021: $3500 Inventory at 31 January 2021: $2800 Calculate the rate of inventory turnover for January.
May/June 2022
N Limited operates as a trading company. Its statement of financial position on 31 December 2021 is shown below.
May/June 2022
Gordon supplies goods to Sybil on credit. Which item from Sybil’s financial statements would matter most to Gordon?
May/June 2023