Analysis and communication of accounting information — Accounting 9706 AS & A Level Question & Worked Solution

(a(i))[1]

Calculate the current ratio on 31 December 2020 (to two decimal places).

(a(ii))[1]

Calculate the trade receivables turnover (days) on 31 December 2020.

(a(iii))[2]

Calculate the return on capital employed on 31 December 2020 (to two decimal places).

(b(i))[2]

Compare the company’s position on 31 December 2020 with that in the previous two years in relation to the current ratio.

(b(ii))[2]

Compare the company’s position on 31 December 2020 with that in the previous two years in relation to the trade receivables turnover (days).

(b(iii))[2]

Compare the company’s position on 31 December 2020 with that in the previous two years in relation to the return on capital employed.

(c)[2]

State two ways in which a company could raise its current ratio.

(d)[3]

State three limitations of comparing the financial performance of different businesses.

Analysis and communication of accounting information — practice question