Accounting 0452 · IGCSE · Interpretation of accounting ratios
Interpretation of accounting ratios — practice question
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.
(a)[9]
Fill in the tables below.
(b(i))[2]
Comment on how gross margin has changed.
(b(ii))[2]
Comment on the change in the liquid (acid test) ratio.
(c)[5]
Advise Adya whether she should cut her selling price. Support your answer.
(d)[2]
Explain how this drawback may affect Adya’s choice about whether or not to cut her selling price.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Ratios must use the correct formulae” …