Interpretation of accounting ratios

Flo and Mo trade in goods that are alike and are sold at comparable prices. They supplied the information below. - Gross margin: Flo $50\%$, Mo $40\%$ - Profit margin: Flo $10\%$, Mo $8\%$ Which trader demonstrates better control of cost of sales and expenses?

Feb/March 2020

A trader is aiming to increase her gross margin. What could she do to achieve this?

Feb/March 2023

Adya trades in goods. She deals in only one type of good and buys and sells it. She has given the information below. For the year ended 31 October 2022: Revenue $98000 Purchases $62305 Expenses $31188 Other income $4630 At 31 October 2022: Inventory $7500 Trade receivables $9240 Trade payables $5365 Bank overdraft $5135 The quantity of inventory and its valuation at 31 October 2022 are both twice the amount at 31 October 2021.

Feb/March 2023

Why would a trader want to raise the number of days for his trade payables turnover?

Feb/March 2025

Raj is a trader who both buys and sells on credit. The information below has been given. Inventory on 1 January 2024 $5500 For the year ended 31 December 2024: Revenue $112000 Purchases $68200 Expenses $21500 On 31 December 2024: Inventory $5700 Trade receivables $16000 Trade payables $5100 Bank overdraft $6890 Capital $285000

Feb/March 2025

X has a current ratio of $2 : 1$. Y has a current ratio of $1.3 : 1$. What does this comparison of the ratios indicate?

May/June 2021

The following information was given for Company X and Company Y. Gross margin: Company X: $36.7\%$ Company Y: $42.6\%$ Profit margin: Company X: $5.4\%$ Company Y: $5.4\%$ Which statement is correct?

May/June 2021

X has a current ratio of $2 : 1$. Y has a current ratio of $1.3 : 1$. What does comparing these ratios reveal?

May/June 2021

Company X and Company Y gave the following data. Gross margin: Company X: $36.7\%$ Company Y: $42.6\%$ Profit margin: Company X: $5.4\%$ Company Y: $5.4\%$ Which statement is correct?

May/June 2021

X has a current ratio of $2:1$ while Y has a current ratio of $1.3:1$. What does comparing these ratios reveal?

May/June 2021

Which actions might a clothing retailer take to improve his rate of inventory turnover?

May/June 2022

In year $1$, John’s rate of inventory turnover stood at $10$ times, but in year $2$ it fell to $8$ times. What could explain the change in the inventory turnover rate?

May/June 2022

Maya recorded annual revenue of $100\,000$. In year $1$, her gross margin stood at $45\%$ and her profit margin stood at $5\%$. In year $2$, her gross margin was $40\%$ and her profit margin was $3\%$. What change occurred to Maya’s cost of sales and expenses in year $2$?

May/June 2022

John’s inventory turnover rate was 10 times in year 1 and 8 times in year 2. What might have led to the change in the inventory turnover rate?

May/June 2022

Maya recorded annual revenue of $100 000. During year 1, her gross margin stood at 45% and her profit margin stood at 5%. During year 2, her gross margin fell to 40% and her profit margin fell to 3%. What change occurred to Maya’s cost of sales and expenses in year 2?

May/June 2022

For what reason does a business's accountant examine its financial statements?

May/June 2023

The table lists the gross margin and profit margin for four businesses. Which business manages its overhead costs most efficiently?

May/June 2023

Sabelo’s liquid (acid test) ratio was greater on 1 January 2022 than on 31 December 2022. What might have led to this?

May/June 2023

The ratios below are given for the businesses of Ewa and Max. Current ratio: Ewa $2.2:1$, Max $2.4:1$ Liquid (acid test) ratio: Ewa $1.4:1$, Max $1.0:1$ An accounting student made these statements. Which of the statements are correct?

May/June 2023

Sabelo’s liquid (acid test) ratio was greater on 1 January 2022 than it was on 31 December 2022. What might have led to this?

May/June 2023

The ratios below apply to the businesses of Ewa and Max. An accounting student produced the statements below. Which of the statements are correct?

May/June 2023

A trader has had the following ratios worked out. profit margin: year 1 = 15%, year 2 = 20% return on capital employed (ROCE): year 1 = 9%, year 2 = 6% What accounts for these changes?

May/June 2024

Miranda’s gross margin declined from $25\%$ in year 1 to $15\%$ in year 2. What could have led to this?

May/June 2024

Miranda’s gross margin decreased from $25\%$ in year 1 to $15\%$ in year 2. What could have led to this?

May/June 2024

Ajay is a retailer. He has supplied the following data: On 1 April 2023: inventory $5200, trade receivables $6875, cash at bank $1946, trade payables $5115 For the year ended 31 March 2024: revenue - credit sales $86 400, cash sales $10 600, purchases $51 300, expenses $23 750 On 31 March 2024: inventory $6500, trade receivables $9550, cash at bank $1200, trade payables $6000 Ajay has traded for 3 years and has built up a strong reputation. He has kept his selling price unchanged. His gross margin for the year ended 31 March 2024 is higher than in the previous years. Ajay is worried about the amounts of his inventory and trade receivables. He is thinking about lowering his selling price. Although Ajay’s gross margin has risen, his profit margin has decreased in each of the last two years. Sales revenue is Ajay’s only source of income.

May/June 2024

Ajay runs a retail business. He has supplied the information below.

May/June 2024

A business has a trade receivables turnover of 42 days. Trade receivables are given 30 days to settle their accounts. The business finds it difficult to pay its credit suppliers. Which statements are right?

May/June 2025

A business has a trade receivables turnover of 42 days. Trade receivables are given 30 days in which to settle their accounts. The business finds it hard to pay its credit suppliers. Which of the following statements are correct?

May/June 2025

Kim’s trade payables turnover rose. What might have led to this?

Oct/Nov 2020

A company gave the following data on its rate of inventory turnover. year 1: 24 times year 2: 25 times year 3: 27 times What factors could account for the changes in the ratio?

Oct/Nov 2020

A company gave the following data for its current ratio. year 1: 2.3 : 1 year 2: 2.4 : 1 year 3: 2.5 : 1 What could account for the changes in the ratio?

Oct/Nov 2020

A trader wants to increase his gross margin. How can this be achieved?

Oct/Nov 2020

A company supplied the information below about its current ratio. year 1: $2.3 : 1$ year 2: $2.4 : 1$ year 3: $2.5 : 1$ What might account for the changes in this ratio?

Oct/Nov 2020

A trader aims to increase his gross margin. In what way could this be achieved?

Oct/Nov 2020

AB Limited and CD Limited each began trading on 1 January 2019 with ordinary share capital of $100\,000. Neither firm had any debentures or loans. The two companies made the same profit in 2019. A dividend was paid only by AB Limited. Return on capital employed (ROCE) was worked out by using closing capital employed. Which statement correctly describes AB Limited’s ROCE in comparison with that of CD Limited?

Oct/Nov 2020

Kim’s trade payables turnover rose. What might have caused this?

Oct/Nov 2020

A company gave the following data for its inventory turnover rate: year 1: $24$ times; year 2: $25$ times; year 3: $27$ times. What could account for the variation in this ratio?

Oct/Nov 2020

A company gave the following details for its current ratio: year 1: $2.3:1$; year 2: $2.4:1$; year 3: $2.5:1$. What could account for the changes in the ratio?

Oct/Nov 2020

Carlos runs a business that sells computer equipment. The information below was supplied for the year ending 31 July 2020.

Oct/Nov 2020

A business gave the following information about its gross margin. Year 1: $40\%$ Year 2: $38\%$ Year 3: $35\%$ What might account for the changes in the gross margin?

Oct/Nov 2021

A business gave the following details about its gross margin. Year 1: $40\%$ Year 2: $38\%$ Year 3: $35\%$ What might account for the changes in gross margin?

Oct/Nov 2021

Sam and Rob each run a trading business. The income for both businesses comes only from selling goods. They gave the information below for the year ending 30 June 2020. Sam: return on capital employed $12\%$, gross margin $25\%$, profit margin $14\%$, current ratio $2.8:1$. Rob: return on capital employed $10\%$, gross margin $30\%$, profit margin $12\%$, current ratio $1.2:1$. Which statement is right?

Oct/Nov 2021

Which measure provides the clearest indication of a business’s liquidity?

Oct/Nov 2021

A business gave the following details about its gross margin. Year 1: $40\%$ Year 2: $38\%$ Year 3: $35\%$ What might account for the changes in the gross margin?

Oct/Nov 2021

A trader gave the information below: year 1 versus year 2 gross profit: 40 000 / 75 000 gross margin: 35% / 35% profit margin: 11% / 22% What might account for these changes?

Oct/Nov 2022

CD Limited obtained a long-term bank loan and used part of the money to settle some of its suppliers on credit before the due date. What effect did this have on trade payables turnover (days) and on return on capital employed (ROCE)?

Oct/Nov 2023

CD Limited obtained a long-term bank loan and used some of the money to settle part of what it owed to its credit suppliers ahead of time. How would this affect the trade payables turnover (days) and the return on capital employed (ROCE)?

Oct/Nov 2023

A business has a trade payables turnover of $36$ days. What do these $36$ days mean?

Oct/Nov 2024

Paul’s gross margin rose from $16.5\%$ in year $1$ to $17.5\%$ in year $2$. Explain what could have caused the improvement in gross margin.

Oct/Nov 2024

Omar’s gross profit margin increased. What might have led to this?

Oct/Nov 2024

Paul’s gross margin rose from $16.5\%$ in year $1$ to $17.5\%$ in year $2$. What could account for the rise in the gross margin?

Oct/Nov 2024

Azim operates as a wholesaler. He sells goods for both cash and on credit. The credit-sale terms for all customers are 30 days. For the year ended 31 December 2023, Azim has supplied the following data: Cash sales $18 170; Credit sales $392 600; Credit purchases $278 429; Inventory at 31 December 2022 $24 074; Inventory at 31 December 2023 $25 600; Money owed by credit customers at 31 December 2023 $42 375; Money owed to credit suppliers at 31 December 2023 $21 603.

Oct/Nov 2024