Accounting 9706 · AS & A Level · Analysis and communication of accounting information

Analysis and communication of accounting information — practice question

Maria operates as a sole trader. Her financial statements for the year ended 31 December 2018 showed the following:
(a(i))[1]

Find the gross margin, giving your answer to two decimal places.

(a(ii))[1]

Find the profit margin, correct to two decimal places.

(a(iii))[2]

Calculate the inventory turnover rate (in times), correct to two decimal places.

(a(iv))[1]

Calculate the current ratio to two decimal places.

(a(v))[1]

Calculate the liquid (acid test) ratio, rounded to two decimal places.

(a(vi))[1]

Calculate the return on capital employed (ROCE), correct to two decimal places.

(b(i))[2]

Suggest possible reasons why Maria’s business changed between 2017 and 2018 in terms of profitability.

(b(ii))[2]

Suggest possible reasons why Maria’s business changed between 2017 and 2018 in terms of liquidity.

(c)[4]

Identify two external stakeholders. Explain why they might be interested in a business’s financial statements.

Worked solution & mark scheme

This 15-mark question has a full step-by-step worked solution and mark scheme. One marking point: Gross margin is 26.20% from 42 700 ÷ 163 000 × 100

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