Accounting 0452 · IGCSE · Interpretation of accounting ratios
Interpretation of accounting ratios — practice question
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
(a)[11]
Fill in the table below.
(b)[4]
Explain how Raj’s lower profit margin may be linked to trade receivables taking longer to settle.
(c)[5]
Advise Raj on whether he should add more capital to the business. Support your answer with points both for and against.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme.