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Topical›Accounting 9706›Financial accounting (AS Level)›Analysis and communication of accounting information›Paper 1

Analysis and communication of accounting information — Paper 1 · A Level Accounting 9706

1.6· 344 questions · 344 marks · 413 min · 2006–2025· Multiple choice

Every Cambridge A Level Accounting Paper 1 question on analysis and communication of accounting information, laid out as 85 A4 pages with the mark scheme below. Nothing is left out. Free to read, no account.

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Question 1: What will increase the working capital and net assets and reserves of a company? A a bonus issue of shares B a debenture issue C an issue o…Question 2: The table shows an extract from a company’s final accounts: $ purchases 28 000 cost of sales 24 000 creditors 4 200 accruals 1 100 What is …Question 3: Acompany has the following gross profit and net profit ratios for two years. Year 1 Year 2 gross profit % 26% 29% net profit % 13% 10% T…Question 4: A firm has $10 000 in the bank and buys stocks for $6000 paying by cheque. What will be the effect on its current ratio and quick (acid tes…1 / 85
Question 5: The following information is given for a business. $ $ Sales 650 000 Less cost of sales Stock 1 January 19 000 Purchases 508 000 527 000 St…Question 6: What is the calculation for capital employed? A current assets – current liabilities B fixed assets + current assets – current liabilities …Question 7: A business has a current ratio of 1.75 : 1 and a quick (acid test) ratio of 1 : 1. The business sells stock on credit at its usual mark-up.…Question 8: During the year ended 31 March 2006 a business made sales of $560 000 of which 25 % were for cash. The trade debtors at 31 March 2005 were …2 / 85
Question 9: The following data is available: this year last year $ $ credit sales 60 000 50 000 credit purchases 40 000 28 000 creditors (average) 10 0…Question 10: A company’s Profit and Loss Account showed a profit before interest of $128 000. Interest paid was $8000. The table shows amounts included …Question 11: The capital structure of a company is shown. $ 700 000 ordinary shares of $0.25 each 175 000 8 % loan stocks 160 000 During the year the co…Question 12: What does the ratio of current assets / current liabilities show? A asset usage B liquidity C profitability D return on capital employed3 / 85
Question 13: A business turns over its stock 5 times a year. Average stock is $54 000 and sales are made at a mark-up of one third. How much are the sal…Question 14: A company has the following information in its balance sheet: $000 taxation due 40 debtors 150 bank overdraft 90 stock 110 proposed dividen…Question 15: A business has cash sales of $69 030 and credit sales of $1 406 070 in a year (360 days). The debtors’ collection period is 40 days. What i…Question 16: A firm has calculated the following accounting ratios for the year ended 30 June: year ended 30 June 2005 30 June 2006 gross profit on sale…Question 17: A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash. The debtor balance is $26 700 and the debtor coll…4 / 85
Question 18: A business has a gross profit to sales ratio of 40 %, and a net profit to sales ratio of 10 %. If the sales volume increases by 8 % which o…Question 19: Which of the following correctly shows the effect of a company increasing the value of its freehold property? asset use ratio gearing A dec…Question 20: What might cause working capital to fall? A an amount owing by a customer has turned out to be a bad debt B an old delivery van has been gi…Question 21: The following information has been taken from a recent balance sheet of a business. $000 fixed assets 150 capital 170 current liabilities 5…Question 22: Which ratio indicates how efficiently a company controls its overheads? A current assets / current liabilities B gross profit / sales C net…5 / 85
Question 23: The following information has been taken from a recent balance sheet. fixed assets $30 000 working capital ratio 5 : 1 capital $34 000 curr…Question 24: The following data is available at the end of a financial year. opening stock $500 000 purchases $2 250 000 closing stock $750 000 gross pr…Question 25: The profit margins of a company over two years showed: 31 March 31 March year 1 year 2 gross profit margin 37.2 % 39.1 % net profit margin …6 / 85
Question 26: A company profit and loss account includes: $000 dividend 300 increase in stock 200 overheads 400 purchases 800 If the net profit percentag…Question 27: Assets and liabilities of a business at its year end include the following information. $ accruals 5 000 bank overdraft 6 800 cash 600 prep…Question 28: Which actions would improve the liquidity (acid test) ratio of a business in the short term? 1 debtors paying their debts 2 delaying paying…Question 29: A business has a debtor turnover period of 40 days based on year end debtors. Annual sales are $180 000 of which 13 % are cash sales. What …7 / 85
Question 30: A company has an issued ordinary share capital of 240 000 ordinary shares of $0.50 each. The company pays a total ordinary share dividend o…Question 31: What will result in a reduction of working capital? A decreasing the rate of stock turnover B reducing the debtor collection period by offe…Question 32: A bank manager has reviewed the financial statements of a business. He notes that the liquidity ratio has fallen but that the sales for the…Question 33: The following information relates to the final accounts of a business. $000 opening stock 2 470 closing stock 2 156 cost of sales for year …Question 34: A company has a share price that gives a dividend yield of 4 %. Earnings per share are $0.32 and half the earnings are paid out as dividend…Question 35: What will result in a reduction of working capital? A decreasing the rate of stock turnover B reducing the debtor collection period by offe…8 / 85
Question 36: A bank manager has reviewed the financial statements of a business. He notes that the liquidity ratio has fallen but that the sales for the…Question 37: The following information relates to the final accounts of a business. $000 opening stock 2 470 closing stock 2 156 cost of sales for year …Question 38: A company has a share price that gives a dividend yield of 4 %. Earnings per share are $0.32 and half the earnings are paid out as dividend…Question 39: A company buys and re-sells goods. It has a higher gross profit margin than its rivals. Which reason could explain this? A Rival companies …Question 40: A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its current ratio is 2 : 1 and its quick (acid test) rati…9 / 85
Question 41: A company’s sales during a 365 day year are shown in the table. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade r…Question 42: The following information is given about four products. Which product makes the most gross profit? inventory (stock) average inventory mark…Question 43: A company buys and re-sells goods. It has a higher gross profit margin than its rivals. Which reason could explain this? A Rival companies …Question 44: A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its current ratio is 2 : 1 and its quick (acid test) rati…Question 45: A company’s sales during a 365 day year are shown in the table. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade r…10 / 85
Question 46: The following information is given about four products. Which product makes the most gross profit? inventory (stock) average inventory mark…Question 47: A company buys and re-sells goods. It has a higher gross profit margin than its rivals. Which reason could explain this? A Rival companies …Question 48: A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its current ratio is 2 : 1 and its quick (acid test) rati…Question 49: A company’s sales during a 365 day year are shown in the table. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade r…Question 50: The following information is given about four products. Which product makes the most gross profit? inventory (stock) average inventory mark…11 / 85
Question 51: A business has current liabilities of $4000 at its year end. The quick (acid test) ratio is 1.5 : 1 The current ratio is 2.25 : 1 What is t…Question 52: A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to 28 % for the year ended 31 December 2009. Wh…Question 53: A business has the following assets and liabilities. $000 $000 non current (fixed) assets 420 inventory (stocks) 120 trade receivables (deb…12 / 85
Question 54: The table shows the year end information for three companies. sales operating profit as % capital employed company $ of all sales $ X 500 0…Question 55: A business has current liabilities of $4000 at its year end. The quick (acid test) ratio is 1.5 : 1 The current ratio is 2.25 : 1 What is t…Question 56: A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to 28 % for the year ended 31 December 2009. Wh…13 / 85
Question 57: A business has the following assets and liabilities. $000 $000 non current (fixed) assets 420 inventory (stocks) 120 trade receivables (deb…Question 58: A business has current liabilities of $4000 at its year end. The quick (acid test) ratio is 1.5 : 1 The current ratio is 2.25 : 1 What is t…Question 59: A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to 28 % for the year ended 31 December 2009. Wh…14 / 85
Question 60: A business has the following assets and liabilities. $000 $000 non current (fixed) assets 420 inventory (stocks) 120 trade receivables (deb…Question 61: The table shows the year end information for three companies. sales operating profit as % capital employed company $ of all sales $ X 500 0…Question 62: The following data is available at the end of a financial year. opening inventory $60 000 purchases $420 000 closing inventory $80 000 mark…15 / 85
Question 63: The annual accounts of a business include the following. $ revenue 160 000 opening inventory 10 000 closing inventory 14 000 Inventory turn…Question 64: A company’s profit from operations was $128 000. Interest payable was $8000. The following amounts were included in the company’s balance s…Question 65: A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick…Question 66: A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash, debtors total $26 700 and the trade receivables t…16 / 85
Question 67: A business sells goods at a mark up of 33.3 %. Information for a year is given. $ revenue 600 000 opening inventory 53 000 closing inventor…Question 68: What is the main use of a computerised age analysis of debtors? A aid debt collection procedures B match sales invoices against orders C re…Question 69: The annual accounts of a business include the following. $ revenue 160 000 opening inventory 10 000 closing inventory 14 000 Inventory turn…Question 70: A company’s profit from operations was $128 000. Interest payable was $8000. The following amounts were included in the company’s balance s…17 / 85
Question 71: A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick…Question 72: The following data is available at the end of a financial year. opening inventory $60 000 purchases $420 000 closing inventory $80 000 mark…Question 73: A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash, debtors total $26 700 and the trade receivables t…Question 74: What is the main use of a computerised age analysis of debtors? A aid debt collection procedures B match sales invoices against orders C re…Question 75: The following data is available at the end of a financial year. opening inventory $60 000 purchases $420 000 closing inventory $80 000 mark…18 / 85
Question 76: The annual accounts of a business include the following. $ revenue 160 000 opening inventory 10 000 closing inventory 14 000 Inventory turn…Question 77: A company’s profit from operations was $128 000. Interest payable was $8000. The following amounts were included in the company’s balance s…Question 78: A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick…Question 79: A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash, debtors total $26 700 and the trade receivables t…19 / 85
Question 80: A business sells goods at a mark up of 33.3 %. Information for a year is given. $ revenue 600 000 opening inventory 53 000 closing inventor…Question 81: A business has a gross profit ratio of 40 %, and a net profit ratio of 10 %. The business has significant fixed costs. If the sales volume …Question 82: The following data is available for a business for the year ended 30 September 2010. opening inventory $1 000 000 purchases for the year $2…Question 83: A company is operating in a very competitive market. Which ratios represent the reaction to the competition? gross profit period of credit …20 / 85
Question 84: The balance sheet of a business at 30 June includes the following items: Year 1 Year 2 trade receivables 47 000 63 000 other receivables 1 …Question 85: The opening inventory of a business is $10 000 and the cost of goods sold is $200 000. Using the average figure of opening and closing inve…Question 86: When is working capital most likely to increase? A when the business increases its selling prices B when the credit period allowed to custo…Question 87: A business has a rate of inventory turnover of 17 times a year. What is the numerator in the calculation? A average inventory B closing inv…Question 88: The following items appear on a balance sheet. $ inventory 20 000 balance at bank 2 000 cash in hand 1 500 trade payables 11 000 provision …21 / 85
Question 89: Which ratio measures a business’ average payment period? A current ratio B liquid ratio C trade payables turnover D trade receivables turno…Question 90: A firm has calculated the following accounting ratios for the year ended 30 June: year ended 30 June 2010 30 June 2011 gross profit on sale…Question 91: What is a limitation of the use of accounting information that is totally outside the entity’s control? A changes in legal reporting requir…Question 92: A balance sheet shows the following information. $ 100 000 ordinary shares of $0.50 each 50 000 50 000 5 % preference shares of $0.10 each …22 / 85
Question 93: A business has a gross profit ratio of 40 %, and a net profit ratio of 10 %. The business has significant fixed costs. If the sales volume …Question 94: The following data is available for a business for the year ended 30 September 2010. opening inventory $1 000 000 purchases for the year $2…Question 95: A company is operating in a very competitive market. Which ratios represent the reaction to the competition? gross profit period of credit …Question 96: The balance sheet of a business at 30 June includes the following items: Year 1 Year 2 trade receivables 47 000 63 000 other receivables 1 …23 / 85
Question 97: The opening inventory of a business is $10 000 and the cost of goods sold is $200 000. Using the average figure of opening and closing inve…Question 98: A company purchases a product that costs $120. The company expects to make a gross profit margin of one-third. What is the company’s mark-u…Question 99: A company raises finance by issuing debentures. What is the effect on net current assets and short term profits? net current profits assets…Question 100: A business finds that it is unable to pay its trade payables because of a poor cash flow. What should it do to improve its cash flow? A fac…Question 101: Which accounting ratio is used to assess working capital management? A gross profit ratio B net profit ratio C rate of inventory turnover D…24 / 85
Question 102: The following are extracts from a company’s financial statements. $ profit for the year before finance charges 100 000 issued share capital…Question 103: Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the inventory increases. What effect does this ha…Question 104: Which item accounts for the difference between the current and liquid ratios? A cash and cash equivalents B inventory C trade payables D tr…Question 105: Arun wishes to invest in a business with a skilled workforce which will make a profit in each of the next five years. Which aspect of finan…25 / 85
Question 106: A company raises finance by issuing debentures. What is the effect on net current assets and short term profits? net current profits assets…Question 107: A business finds that it is unable to pay its trade payables because of a poor cash flow. What should it do to improve its cash flow? A fac…Question 108: For some years a business has given 2 % cash discount to its customers and lost 3 % of its inventory to pilferage by staff. On 1 January, t…26 / 85
Question 109: The table gives information about a company. year 1 year 2 $ $ revenue 150 000 200 000 cost of sales 105 000 130 000 45 000 70 000 administ…Question 110: A business turns over its inventory 5 times a year. Average inventory is $54 000 and sales are made at a mark-up of one-third. How much are…Question 111: What is not included in the calculation of the liquid ratio (acid test)? A accruals for rent B amounts prepaid for insurance C inventory of…Question 112: The owner of a business has to decide whether to sell a particular type of product. Which ratio is the most useful in making the decision? …27 / 85
Question 113: A company purchases a product that costs $120. The company expects to make a gross profit margin of one-third. What is the company’s mark-u…Question 114: A business has noticed a significant increase in its trade receivables collection period. What would be the most appropriate action to help…Question 115: Which accounting ratio is used to assess working capital management? A gross profit ratio B net profit ratio C rate of inventory turnover D…Question 116: The following are extracts from a company’s financial statements. $ profit for the year before finance charges 100 000 issued share capital…Question 117: Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the inventory increases. What effect does this ha…28 / 85
Question 118: Which item accounts for the difference between the current and liquid ratios? A cash and cash equivalents B inventory C trade payables D tr…Question 119: What does the current ratio show? A if inventory is being used efficiently B the profit that has been made C whether a business is able to …Question 120: A company has the following year end information. $000 credit purchases 320 credit sales 800 total purchases 440 total sales 900 trade paya…Question 121: The following information is extracted from a company's financial statements. income statement $000 profit from operations 200 finance char…29 / 85
Question 122: A company’s profit before finance charges has increased by 10 % in a year, whilst its gross profit has only increased by 5 %. Which factors…Question 123: A company has the following year end information. $000 credit purchases 210 credit sales 630 total purchases 280 total sales 840 trade paya…Question 124: A company has a current ratio of 2:1. Which transactions would always increase the ratio? 1 buying goods on credit 2 debtors paying their a…Question 125: A company wants to increase its return on capital employed in the short-term. Which course of action will achieve this? A invest in new pla…30 / 85
Question 126: Beatrice calculates some ratios to help her understand her financial statements. What helps her interpretation of the ratios? A availabilit…Question 127: A company published the financial statements for the year ending 31 December 2011, an extract of which is detailed below. $ retained earnin…Question 128: Which transactions would decrease short term liquidity, as measured by the liquid (acid test) ratio? 1 buying non-current assets for cash 2…Question 129: The following information relates to the financial statements of a business. $000 opening inventory 2 470 closing inventory 2 156 cost of s…31 / 85
Question 130: Acompany has the following gross profit and net profit ratios for two years. year 1 year 2 gross profit % 26 29 net profit % 13 10 The co…Question 131: Peter is a sole trader whose business is profitable. He is considering going into partnership with Axel, another sole trader, to improve hi…Question 132: The profit margins of a company over two years showed the following. 31 March 31 March year 1 year 2 gross profit margin 37.2% 39.1% net pr…32 / 85
Question 133: A company has the following items on its statement of financial position. $000 ordinary shares 12 000 10% preference shares 5 000 retained …Question 134: A business provides the following financial information. $ opening inventory 24 000 closing inventory 32 000 cost of sales 140 000 sales 22…Question 135: Who is most likely to use an age analysis of debtors? A cashier B credit controller C sales ledger supervisor D sales managerQuestion 136: A company has ordinary shares of $1 each. Each year it pays a dividend of 10% of the nominal value of the shares. It now wishes to raise a …Question 137: A company had a trade receivables collection period of 80 days in 2011 and 100 days in 2012. Total revenue was the same for both years. Whi…33 / 85
Question 138: A company’s financial statements show the following. $ profit from operations 160 000 finance charges 40 000 ordinary share capital 500 000…Question 139: The following information has been taken from a statement of financial position. $ non-current assets 150 000 capital and reserves 170 000 …Question 140: The following shows extracts from the statement of financial position of a company. at 30 September $ non-current assets 120 000 inventory …Question 141: A company’s non-current asset turnover ratio decreases this year compared to last year. Which single factor could cause this to happen? A a…34 / 85
Question 142: A company’s financial statements show the following. $ issued share capital 300 000 profit from operations 160 000 profit after preference …Question 143: What would increase the current ratio of a business? A buying goods on credit for $2000 and selling immediately for $3000 cash B paying cre…Question 144: The following information was extracted from the books of a trader. $ revenue for the year 126 000 purchases for the year 87 000 opening in…Question 145: A company wishes to improve its current ratio and its liquid (acid test) ratio. How can this be done? A increasing discounts to trade recei…Question 146: Which of the following measures a business’ average credit period? A current ratio B inventory turnover C liquid (acid test) ratio D trade …35 / 85
Question 147: A business is reviewing credit limits for its customers. What would result in a customer’s credit limit being reduced? A Cash discounts are…Question 148: The trade receivables turnover for a company was 100 days in 2011. This reduced to 90 days in 2012, with no change in the sales revenue. Wh…Question 149: A company provides the following information. $ trade payables at start of year 38 000 trade payables at end of year 49 000 payments to cre…Question 150: On 1 May, a trader lost all of his inventory in a fire. He has figures for sales and purchases and wishes to calculate the value of the inv…36 / 85
Question 151: The following information is available about two similar businesses. X Y sales $30 000 $35 000 gross profit percentage 60% 62% net profit p…Question 152: A business has a non-current asset turnover of two times, based on non-current assets valued at $250 000 at the end of 2011. The company us…Question 153: Which basis should be used to calculate the amount of advertising to be charged to a store with two departments? A area of floor space B co…Question 154: What is not considered a source of finance? A debentures B share capital C trade payables D trade receivables37 / 85
Question 155: The following financial information is available for a business. All purchases and sales are made on credit. $ raw materials purchased 121 …Question 156: The following items appear on a statement of financial position. $ inventory 20 000 balance at bank 2 000 cash in hand 1 500 trade payables…Question 157: A company’s financial statements show the following. $ profit before interest 125 378 profit for the year 120 426 200 000 shares $1 each 20…Question 158: The gross profit ratio of a business has increased. Which statement is correct? A Inventories have decreased. B Purchases have been obtaine…38 / 85
Question 159: A company’s financial statements include the following. $ profit before interest 200 000 profit for the year 140 000 issued share capital 5…Question 160: A business sells a single product. This year the gross profit margin and net profit margin were both lower than last year. What is the reas…Question 161: The following information is given about four products. Which product makes the most gross profit? inventory turnover average inventory mar…Question 162: A company’s non-current asset turnover figure rises from 3.4 times in Year 1 to 4 times in Year 2. Sales revenue has been constant. What ex…39 / 85
Question 163: Gordon sells goods on credit to Sybil. Which information from Sybil’s financial statements is of greatest interest to him? A current ratio …Question 164: Which ratio would not assist in calculating the amount of stolen inventory? A gross profit margin B mark up C rate of inventory turnover D …Question 165: A business starts factoring its debts. Which effect does this have on its current ratio and its short term cash flow? short term current ra…Question 166: A company provides the following information. profit for the year non-current $ asset turnover 2009 15 000 4 times 2010 16 000 3.5 times 20…40 / 85
Question 167: A business provided the following information. year 1: closing inventory $200 000; cost of goods sold $800 000. year 2: closing inventory i…Question 168: The table shows extracts from the financial statements of a company: $ non-current assets at cost 750 000 non-current assets at net book va…Question 169: Radis Limited pays dividends on ordinary shares in the range of 8% to 12% each year. The current dividend is $20 000. The directors do not …Question 170: A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick…41 / 85
Question 171: A supplier wishes to see the financial statements of a customer to help decide whether to continue trading with him. Which figure would be …Question 172: A business increased its sales revenue by 50% in one year whilst its cost of sales has increased by 60% over the same period. What is the e…Question 173: A business has a year end of 31 December. It expects to achieve sales in 2014 of $450 000. On 31 December 2013 its non-current assets were …Question 174: A business has the following information for the past two financial years. year 1: average inventory $100 000; revenue $800 000; gross marg…Question 175: The draft accounts of a business for the year ended 30 June 2013 include the following: $ revenue 280 000 gross profit 60 000 It was subseq…42 / 85
Question 176: The following financial information is available. $ trade payables 10 000 bank overdraft 4 400 trade receivables 20 000 other receivables 6…Question 177: Analysis of a business’s financial statements shows the following. net profit ratio inventory turnover (%) (days) 2011 21 62 2012 23 58 201…Question 178: X Limited and Y Limited both started trading on 1 January 2001. Each year, both businesses had a profit from operations of $20 000. On 31 D…43 / 85
Question 179: Who will be most interested in a business maximising its profitability? A customers B general public C investors D suppliersQuestion 180: A company’s sales revenue has increased by 40% in a period, but its gross profit has only increased by 30%. Which factors could explain thi…Question 181: A company has the following assets and liabilities. current assets $ current liabilities $ inventory 55 000 trade payables 62 000 trade rec…Question 182: A business has the following current assets and current liabilities. $ trade receivables 6000 bank overdraft 1500 cash in hand 50 trade pay…44 / 85
Question 183: The following information has been extracted from the financial statements of a sole trader for the year ended 31 March. $ $ revenue 198 20…Question 184: The following figures have been extracted from the financial statements of a business. $ trade receivables 45 000 provision for doubtful de…Question 185: Why does a business have a higher gross profit margin than its rivals? A Its rivals pay less for goods. B Its rivals pay more for goods. C …Question 186: How is mark up calculated? A gross profit / cost of sales × 100 B gross profit / revenue × 100 C profit for the year / cost of sales × 100 …45 / 85
Question 187: A business has a gross profit ratio (margin) of 40%, and a net profit ratio (percentage) of 10%. The business has significant fixed costs. …Question 188: Petra supplies goods on credit to Ashy Limited. What is Petra’s main interest in considering Ashy Limited’s financial statements? A to disc…Question 189: A company’s gross profit ratio (margin) for the year ended 31 December 2013 was 25%. This increases to 28% for the year ended 31 December 2…Question 190: Which ratio will give the best indication of short term liquidity? A current ratio B liquid (acid test) ratio C trade payables turnover (da…Question 191: An investor is looking at the financial statements of a company in which he may decide to invest. Which item helps him to rely on the finan…46 / 85
Question 192: A business provides the following information. $ revenue 600 000 raw materials purchased 400 000 trade payables 40 000 trade receivables 50…Question 193: A trader provides the following information for the year. inventory 1 January $15 125 inventory 31 December $22 185 ordinary goods purchase…Question 194: A business provides the following information. $ opening inventory 15 000 purchases 120 000 closing inventory (25 000) 110 000 What is the …47 / 85
Question 195: A business provides the following information about its rate of inventory turnover. year 1 10 times year 2 8 times The selling price per un…Question 196: A decrease in which ratio indicates a better performance for a business? A inventory turnover in days B non-current asset turnover C return…Question 197: When is working capital most likely to increase? A when the business increases its selling prices B when the credit period allowed to custo…Question 198: John failed to write off a bad debt of $8000. What was the effect of this omission? A His trade payables turnover (in days) was overstated.…Question 199: A company raises cash by issuing 8% debentures. What is the effect on the company’s profits and equity in the year of issue? profits equity…48 / 85
Question 200: A company has a current ratio of 2 : 1. Its bank balance is $80 000 debit and its current liabilities are $200 000. It then issues 50 000 n…Question 201: During the year ended 31 March 2015, a business made sales of $560 000 of which 25% were for cash. The trade receivables at 31 March 2014 w…Question 202: What is measured by the return on capital employed ratio? A percentage of profit paid out as dividends only B percentage of profit paid out…Question 203: The following ratios have been calculated for two businesses, both with the same revenue of $100 000. X Y gross margin 20% 25% profit margi…Question 204: A business provides the following information. gross margin 20% $ sales 275 325 opening inventory 25 450 closing inventory 55 975 What are …49 / 85
Question 205: A company provides the following information. $ ordinary share capital 50 000 retained earnings at the end of the year 11 000 8% debentures…Question 206: A business purchases inventory by cash. Which effects will this have on liquidity ratios? current ratio liquid (acid test) ratio A decrease…Question 207: X supplies goods on credit. He looked at the financial statements of two other businesses to see if he wanted to trade with them. He found …50 / 85
Question 208: A company’s profit from operations has increased by 10% in a year, whilst its gross profit has only increased by 5%. Which factors could ex…Question 209: A company has 1 000 000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of $300 000. Profit from operations for the year …Question 210: A company wants to increase its return on capital employed in the short term. Which course of action will achieve this? A invest in new pla…Question 211: Which item is included in the current ratio but not the liquid (acid test) ratio? A cash at bank B inventory C trade payables D trade recei…51 / 85
Question 212: A business has prepared the following information for the year ended 30 April 2015. $ $ revenue 220 000 opening inventory 25 000 purchases …Question 213: A company provides the following information. $ ordinary share capital 50 000 retained earnings at the end of the year 11 000 8% debentures…Question 214: A business purchases inventory by cash. Which effects will this have on liquidity ratios? current ratio liquid (acid test) ratio A decrease…52 / 85
Question 215: X supplies goods on credit. He looked at the financial statements of two other businesses to see if he wanted to trade with them. He found …Question 216: In 2014 a company was entirely financed by its equity and reserves which total $1 000 000. Its return on capital employed was 28%. On 1 Jan…Question 217: Which action will improve the current ratio? A providing a cash discount to trade receivables B requesting a longer payment period from sup…Question 218: Raj, a supplier of goods, has calculated the following ratios from the financial statements of a possible new customer. 1 current ratio 2 n…Question 219: Which action leaves the value of working capital unchanged? A disposal of a non-current asset B issuing shares for cash C purchasing goods …53 / 85
Question 220: Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the inventory increases. Which effects does this …Question 221: A business has calculated inventory turnover ratio as 8 times. Opening inventory was $25 000 and closing inventory was $28 000. What is the…Question 222: Which ratio indicates how efficiently a company controls its overheads? A current ratio B gross margin C profit margin D trade receivables …Question 223: A company produces the following information. profit from operations 98 000 profit for the year 91 000 equity at the end of the year 500 00…Question 224: The table shows year end information for a company. income statement $ statement of financial position $ profit from operations 14 000 5% d…54 / 85
Question 225: A company provided the following information. $ revenue for the year 390 000 year-end non-current assets at cost 260 000 year-end accumulat…Question 226: On 1 May, a trader lost all of his inventory in a fire. He has values for sales and purchases and wishes to calculate the value of the inve…Question 227: The following information was available for a business. $ equity 90 625 non-current liabilities 36 250 profit from operations 24 375 profit…Question 228: A business provided the following information. $ non-current assets at cost 525 000 non-current assets at net book value 350 000 revenue 80…55 / 85
Question 229: A company’s sales during a 365-day year are shown. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade receivables tu…Question 230: Who are internal users of accounting information? A customers B directors C lenders D shareholdersQuestion 231: A company provides the following information. $ profit from operations 16 000 finance costs 4 000 ordinary share capital ($1 shares) 50 000…Question 232: The following financial information is available for a business. All purchases and sales are made on credit. $ purchases 121 980 revenue 20…56 / 85
Question 233: The following items appear on a statement of financial position. $ inventory 20 000 balance at bank 2 000 cash in hand 1 500 trade payables…Question 234: A company’s financial statements show the following. $ sales 570 000 cost of goods sold 210 000 operating expenses 65 000 non-current asset…Question 235: A company’s capital employed consists of ordinary shares of $1 each and retained earnings of $50 000. The following information is availabl…Question 236: Which action would increase a company’s current ratio? A paying rent in advance B receiving money from trade receivables C repaying a long-…57 / 85
Question 237: Calculation of which ratio does not include revenue? A gross margin B mark-up C non-current asset turnover D profit marginQuestion 238: Bradshaw does not keep proper books of account. The following information is available for the year. cost of sales $750 000 mark-up 20% cas…Question 239: The financial statements of a company showed the following. $ current liabilities 15 000 non-current liabilities 40 000 ordinary shares 120…Question 240: The opening inventory for a business was $60 000. The closing inventory was $80 000. Inventory turnover for the year was 10 times. The gros…58 / 85
Question 241: Which statement about the limitations of comparing accounting ratios between similar businesses and over time is correct? A The ratios are …Question 242: The following has been extracted from the financial statements of a business. $ revenue 135 000 total capital employed 575 000 non-current …Question 243: The following has been extracted from the financial statements of a business. statement of financial income statement $ $ position profit f…Question 244: What would affect the current ratio of a business? A purchase of inventory by cash B purchase of new machinery by cheque C receipt of cash …59 / 85
Question 245: The following is an extract from an income statement. $ revenue 180 000 costs of goods sold (75 000) distribution costs (8 000) administrat…Question 246: The following information is available for the year ended 31 December 2017. $000 revenue 640 cost of sales 350 machinery at net book value …Question 247: A company raises finance by issuing debentures. What is the effect on net current assets and short-term profits? net current short-term ass…60 / 85
Question 248: Why would employees be interested in their employer’s financial statements? A to assess whether the business can continue to trade in the f…Question 249: A business has provided the following information. costs of sales $240 000 gross margin 25% profit for the year $16 000 What was the expens…Question 250: A company provided the following information. $ total assets 160 000 non-current assets 124 000 equity 92 000 non-current liabilities 45 00…Question 251: A business provides the following extract from its income statement. $ opening inventory 15 000 purchases 180 000 closing inventory (18 750…61 / 85
Question 252: Which actions would, in general, improve the liquid (acid test) ratio of a business in the short term? 1 delaying trade payables 2 selling …Question 253: Why is inventory excluded from the calculation of the quick ratio? A Business can choose either FIFO and AVCO for inventory valuation. B In…Question 254: The financial data relates to two businesses. X Y trade receivable turnover (days) 90 40 trade payable turnover (days) 50 70 liquid (acid t…Question 255: The following information is available for a business for the year. $ revenue 2 400 000 cost of sales 1 100 000 administration expenses 400…62 / 85
Question 256: A company’s financial statements include the following. $ profit before interest 200 000 profit for the year 140 000 issued share capital 5…Question 257: Which item would result in a decrease in the expenses to revenue ratio? A accrual for telephone B increase in provision for doubtful debts …Question 258: Which ratio calculates the average time a business takes to pay its credit suppliers? A current ratio B liquid (acid test) ratio C trade pa…Question 259: A business has prepared the following information for the year ended 30 April 2019. $ $ revenue 220 000 opening inventory 25 000 purchases …63 / 85
Question 260: A trader wishes to set a selling price. How does he use a mark-up? A by adding a percentage to the cost B by adding a percentage to the sel…Question 261: Which accounting ratio could not be used to assess the ability of a business to pay its trade payables? A current ratio B expenses to reven…Question 262: A sole trader has provided the following information. revenue for the year $240 000 average inventory $25 000 mark-up 50% What was the rate…Question 263: A business provided the following information. gross margin 20% $ sales 275 325 opening inventory 25 450 closing inventory 55 975 What were…Question 264: A reduction in which item would improve a business’s profit margin? A depreciation charge B drawings C trade payables turnover (days) D tra…64 / 85
Question 265: A company’s financial statements showed the following. $000 revenue 250 cost of sales (60) distribution costs (45) administrative expenses …Question 266: Which information would an investor gain by looking at the financial statements of a business? 1 identifying future trading prospects 2 ide…Question 267: A company provides the following information for the year ended 31 May 2019. $ total purchases 175 000 cash purchases 35 000 inventory 1 Ju…Question 268: A business applied a mark-up of 25%. Which statement is correct? A Gross margin is 20%. B Gross margin is 25%. C Profit margin is 20%. D Pr…65 / 85
Question 269: A company’s results for a year showed credit sales of $500 000. The trade receivables collection period was 73 days. In the next year, cred…Question 270: A business has the following current assets and current liabilities. $ trade receivables 6000 bank overdraft 1500 cash in hand 50 trade pay…Question 271: The rate of inventory turnover of a company has been calculated for two successive periods. current period 5.6 times previous period 4.8 ti…66 / 85
Question 272: The following items appear on a statement of financial position. $ inventory 20 000 cash and cash equivalents 3 500 trade payables 11 000 p…Question 273: A trader has a current ratio of 2 : 1. Which event would cause this ratio to increase? A buying goods for resale on credit B buying new mac…Question 274: A company buys and sells all of its inventory on a credit basis. The following information is available. $ purchases 450 000 sales 500 000 …Question 275: A company purchases a product that costs $120. The company expects to make a gross margin of one-third. What is the company’s mark-up? A $4…67 / 85
Question 276: The following information is available. $ $ revenue 600 000 opening inventory 46 000 purchases 244 000 290 000 closing inventory 50 000 240…Question 277: At the end of his first year of trading, the trader lost all of his inventory in a fire. He knows the values of sales and purchases and wis…Question 278: The trade receivables turnover ratio figures for two companies are shown. company turnover in days X 45 Y 55 What does this indicate about …68 / 85
Question 279: A trader has been making a provision for irrecoverable debts for some years. He is now considering reducing the percentage rate of the prov…Question 280: The following information is available for a business for the year ended 31 December 2020. rate of inventory turnover 20 times opening inve…Question 281: What are limitations of using accounting ratios for comparisons between firms in the same industry? 1 Different businesses may have differe…Question 282: Abdul is assessing the profitability and efficiency of his business and is using these figures from the financial statements. $ non-current…69 / 85
Question 283: The following information was available for a business for the year ended 31 December. annual sales $400 000 gross margin 20% rate of inven…Question 284: A trader’s income statement recorded sales, $10 000, and cost of sales, $7070. The trader had taken goods for his own use during the year, …Question 285: The following information is available. sales $250 000 purchases $120 000 average inventory $20 000 mark-up 25% What is the rate of invento…Question 286: The trade receivables turnover of a business has been calculated for two years. turnover in days this year 60 last year 50 What is a possib…70 / 85
Question 287: The following information is available for a business. sales revenue $500 000 purchases $365 000 gross margin 25% mark-up 33 % 1 3 inventor…Question 288: The following shows extracts from the statement of financial position of a company. at 30 September $ non-current assets 120 000 inventory …Question 289: What would increase the current ratio of a business? A buying goods on credit for $2000 and selling immediately for $3000 cash B paying wag…Question 290: The following information is available for a business. $ sales 36 000 purchases 21 000 inventory at 1 January 2021 3 500 inventory at 31 Ja…71 / 85
Question 291: What does return on capital employed measure for a business? A efficiency to generate profit from its total assets B efficiency to generate…Question 292: The following information was available for a business at the end of a financial year. $ sales 300 000 opening inventory 33 000 closing inv…Question 293: A business buys goods for resale, paying by cheque rather than buying on credit. What effect will this have on the current ratio and the li…Question 294: The following information is available. $ non-current assets at cost at 31 December 2021 400 000 provision for depreciation at 31 December …72 / 85
Question 295: A business has a rate of inventory turnover of 17 times. What is the numerator in the calculation? A average inventory B closing inventory …Question 296: The year-end statement of financial position of X Limited at 31 December shows the following: $000 non-current assets 1350 current assets 1…Question 297: Which statements describe the usefulness of cost–volume–profit analysis? 1 to see the relationship between costs and revenue at different l…Question 298: Gordon sells goods on credit to Sybil. Which information from Sybil’s financial statements is of greatest interest to Gordon? A current rat…73 / 85
Question 299: Which actions would, in general, improve the acid test ratio of a business in the short term? 1 delaying trade payables 2 selling inventory…Question 300: A business had current liabilities of $4000 at its year end. The acid test ratio was 1.5 : 1. The current ratio was 2.25 : 1. What was the …Question 301: The following information is available for a company for its year ended 31 December. $ non-current assets 472 000 current assets 60 000 cur…Question 302: Which three key users of financial statements will be most interested in the statement of profit or loss? A employees, environmental bodies…74 / 85
Question 303: Raj, a supplier of goods, has calculated the following ratios from the financial statements of a possible new customer. 1 current ratio 2 n…Question 304: The following information is available for a business for the year ended 31 December. $000 revenue 800 purchases 600 owing to credit suppli…Question 305: The table shows information from a company’s financial statements. $000 revenue 135 gross profit 34 profit from operations 11 profit for th…75 / 85
Question 306: Which stakeholders use the financial statements to assess whether a company is a reasonable credit risk? A customers B employees C governme…Question 307: Which statements describe the limitations of accounting information? 1 Businesses in the same industry may use different accounting policie…Question 308: A company provided the following information at the end of its first year of trading. $ cash sales 9 000 credit sales 27 000 receipts from …Question 309: A company’s profit from operations during a year was $128 000. Interest payable was $8000. The following amounts were included in the compa…Question 310: Why would employees be interested in their employer’s financial statements? A to assess whether the business can continue to trade in the f…76 / 85
Question 311: A business received a five-year loan of $40 000. The loan was paid into the bank current account. What was the effect of the loan? return o…Question 312: The draft financial statements of a business for the year ended 30 June included the following: $ revenue 280 000 gross profit 60 000 It wa…Question 313: The following information is available for a company. sales revenue for the year $1 600 000 debenture interest paid $60 000 gross profit ma…77 / 85
Question 314: A company has calculated inventory turnover periods for two successive years. inventory year turnover in days 1 90 2 120 Company directors …Question 315: The following information is available for a business at the end of its financial year. $ credit purchases 140 000 credit sales 220 000 tot…Question 316: Which statement reflects how cost–volume–profit (CVP) analysis can help with management decision-making? A separating out fixed and variabl…Question 317: Which is an internal stakeholder? A bank B debenture holder C employee D potential investor78 / 85
Question 318: In the last financial year, R Limited had sales revenue of $190 000 and operating expenses of $108 000. In the current financial year, the …Question 319: The following information is available for a business. $ total purchases 820 000 credit purchases 740 000 opening inventory 60 000 closing …Question 320: Jim is a manager in a limited company. He also owns a few of its shares. Why has he been looking at its most recent financial statements? A…Question 321: H Limited’s cost of sales for the recent two years (Year 2 and Year 1) is as follows: Year 2 Year 1 $ $ average inventory 100 000 65 000 cr…79 / 85
Question 322: A business provided the information shown for a period. $ sales revenue 1 500 000 purchases 1 000 000 inventory at end of the period 50 000…Question 323: When comparing with the previous year, a trader finds that his gross profit margin has increased and his trade receivables turnover has dec…Question 324: B Limited had credit sales for the year of $3 285 000 and trade receivables at year end of $405 000. The sales director believed that if ca…Question 325: Who are internal users of accounting information? A customers B directors C potential investors D providers of finance80 / 85
Question 326: Which actions will make the acid test ratio worse? 1 owner taking goods for own use 2 paying trade payables 3 purchasing a non-current asse…Question 327: A business provided the following information relating to its most recent financial period. $ sales revenue 1 020 000 purchases 700 000 car…Question 328: Marcus bought a non-current asset. Instead of paying in full he decided to pay in instalments over the next six months. What was the effect…Question 329: Which statement is a limitation of accounting ratios? A they do not aid comparison with the business’s past performance B they do not help …81 / 85
Question 330: A business provided the following information at the end of a financial period. $ total purchases for the period 700000 cash purchases duri…Question 331: Which ratio measures the efficiency of a business? A acid test B mark-up C non-current asset turnover D return on capital employedQuestion 332: A sole trader’s cost of sales is $240 000. The gross profit margin is 20%. What are the sales for the year? A $280000 B $288000 C $300000 D…Question 333: The draft financial statements of a business showed values for trade receivables, inventory, trade payables and bank overdraft. Which event…82 / 85
Question 334: The following information is available about Chi’s business. $ opening inventory 18000 closing inventory 26000 cost of sales 442000 When ca…Question 335: Which statements about ratios are correct? 1 Ratios are affected by accounting policies. 2 Ratios can be compared with industry averages. 3…Question 336: A company had the following balances at 31 December. $ inventory 31000 trade receivables 88000 allowance for irrecoverable debts 2000 bank …Question 337: Which statements about ratios are correct? 1 Ratios are affected by accounting policies. 2 Ratios can be compared with industry averages. 3…83 / 85
Question 338: Which stakeholders would focus mainly on the liquidity of a business? 1 government 2 lenders 3 public and environmental bodies 4 suppliers …Question 339: A company’s financial statements show the following information. $ profit from operations 125000 profit for the year 116000 shareholders’ e…Question 340: The owner of a business has provided the following information. average inventory $15000 rate of inventory turnover 8 times mark-up 25% Wha…Question 341: Who are the internal users of financial information? 1 bank 2 directors 3 employees 4 potential investors A 1 and 2 B 2 and 3 C 2 and 4 D 3…84 / 85
Question 342: A trader calculates his trade receivables turnover as 89 days. What was the denominator (bottom figure) in his calculation? A credit purcha…Question 343: The following details have been extracted from the financial statements of a limited company. statement of profit or loss for the year $ pr…Question 344: A trader calculates his rate of inventory turnover as eight times a year. What was the numerator (top figure) in his calculation? A average…85 / 85

Mark scheme344 answers

Answers below. Sit the paper first if you are practising.

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

1C1
2A1
3D1
4D1
5A1
6B1
7D1
8C1
9D1
10D1
11A1
12B1
13D1
14A1
15C1
16C1
17B1
18D1
19A1
20A1
21C1
22C1
23B1
24D1
25C1
26B1
27B1
28D1
29B1
30A1
31B1
32D1
33A1
34B1
35B1
36D1
37A1
38B1
39C1
40B1
41C1
42D1
43C1
44B1
45C1
46D1
47C1
48B1
49C1
1 / 8

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

50D1
51A1
52C1
53A1
54A1
55A1
56C1
57A1
58A1
59C1
60A1
61A1
62C1
63B1
64D1
65C1
66B1
67D1
68A1
69B1
70D1
71C1
72C1
73B1
74A1
75C1
76B1
77D1
78C1
79B1
80D1
81D1
82A1
83B1
84C1
85C1
86A1
87C1
88B1
89C1
90C1
91A1
92C1
93D1
94A1
95B1
96C1
97C1
98B1
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Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

99C1
100A1
101C1
102A1
103C1
104B1
105B1
106C1
107A1
108D1
109D1
110C1
111C1
112B1
113B1
114A1
115C1
116A1
117C1
118B1
119C1
120B1
121C1
122C1
123C1
124D1
125C1
126A1
127A1
128A1
129C1
130D1
131C1
132C1
133C1
134C1
135B1
136D1
137C1
138A1
139C1
140A1
141C1
142A1
143A1
144C1
145D1
146D1
147D1
3 / 8

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

148A1
149B1
150A1
151C1
152D1
153D1
154D1
155A1
156B1
157B1
158B1
159A1
160C1
161D1
162C1
163A1
164D1
165A1
166D1
167B1
168D1
169D1
170C1
171C1
172D1
173A1
174D1
175D1
176C1
177C1
178D1
179C1
180C1
181C1
182D1
183B1
184C1
185B1
186A1
187D1
188B1
189C1
190B1
191A1
192D1
193B1
194C1
195D1
196A1
4 / 8

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

197A1
198C1
199B1
200B1
201C1
202D1
203B1
204C1
205C1
206C1
207B1
208C1
209B1
210C1
211B1
212B1
213C1
214C1
215B1
216D1
217C1
218B1
219C1
220C1
221B1
222C1
223B1
224C1
225D1
226A1
227B1
228D1
229C1
230B1
231C1
232A1
233B1
234D1
235B1
236D1
237B1
238B1
239C1
240D1
241C1
242B1
243B1
244B1
245A1
5 / 8

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

246C1
247C1
248A1
249C1
250A1
251C1
252B1
253C1
254C1
255A1
256A1
257C1
258C1
259B1
260A1
261B1
262C1
263C1
264A1
265A1
266D1
267C1
268A1
269B1
270D1
271C1
272B1
273C1
274C1
275B1
276B1
277A1
278C1
279B1
280B1
281B1
282D1
283C1
284B1
285C1
286D1
287A1
288A1
289A1
290B1
291D1
292B1
293C1
294D1
6 / 8

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

295C1
296B1
297B1
298A1
299B1
300A1
301B1
302D1
303B1
304C1
305D1
306D1
307A1
308C1
309D1
310A1
311C1
312D1
313C1
314C1
315B1
316B1
317C1
318B1
319C1
320B1
321D1
322A1
323C1
324C1
325B1
326D1
327B1
328A1
329D1
330C1
331C1
332C1
333C1
334B1
335A1
336B1
337A1
338D1
339D1
340B1
341B1
342B1
343C1
7 / 8

Pastlit

Accounting 9706 · Analysis and communication of accounting information — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

344C1
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153D19706/11 May/June 2014
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Another paper, or another topic

Paper
Paper 1344 questionsPaper 258 questionsPaper 358 questions

All of Financial accounting (AS Level) →

Questions as text

Q1 · What will increase the working capital and net assets and reserves of a company? 9706/11 May/June 2006

19 What will increase the working capital and net assets and reserves of a company? A a bonus issue of shares B a debenture issue C an issue of shares at a premium D an issue of shares at nominal value

1 marks

Answer: C

This question in 9706/11 May/June 2006

Q2 · The table shows an extract from a company’s final accounts: $ purchases 28 000 cost of… 9706/11 May/June 2006

23 The table shows an extract from a company’s final accounts: $ purchases 28 000 cost of sales 24 000 creditors 4 200 accruals 1 100 What is the creditors’ collection period for the year? A 55 days B 64 days C 69 days D 81 days

1 marks

Answer: A

This question in 9706/11 May/June 2006

Q3 · Acompany has the following gross profit and net profit ratios for two years 9706/11 May/June 2006

24 Acompany has the following gross profit and net profit ratios for two years. Year 1 Year 2 gross profit % 26% 29% net profit % 13% 10% The company’s turnover has remained unchanged for both years. What is a correct interpretation of these ratios? cost of sales overheads increased | decreased increased | decreased 008 > x « & \ \ x \ x x ~ KOM

1 marks

Answer: D

This question in 9706/11 May/June 2006

Q4 · A firm has $10 000 in the bank and buys stocks for $6000 paying by cheque 9706/11 May/June 2006

25 A firm has $10 000 in the bank and buys stocks for $6000 paying by cheque. What will be the effect on its current ratio and quick (acid test) ratio? current ratio quick (acid test) ratio A no effect no effect B decreases increases C decreases no effect D no effect decreases

1 marks

Answer: D

This question in 9706/11 May/June 2006

Q5 · The following information is given for a business 9706/11 May/June 2006

26 The following information is given for a business. $ $ Sales 650 000 Less cost of sales Stock 1 January 19 000 Purchases 508 000 527 000 Stock 31 December 25 000 502 000 Gross Profit 148 000 Stock turnover 16 days Debtors 31 December $48 082 Creditors 31 December $44 537 What is the working capital cycle? A 11 days B 21 days C 43 days D 75 days

1 marks

Answer: A

This question in 9706/11 May/June 2006

Q6 · What is the calculation for capital employed? 9706/11 Oct/Nov 2006

7 What is the calculation for capital employed? A current assets – current liabilities B fixed assets + current assets – current liabilities C fixed assets + current assets + current liabilities D net assets – current liabilities

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2006

Q7 · A business has a current ratio of 1.75 : 1 and a quick (acid test) ratio of 1 : 1 9706/11 Oct/Nov 2006

23 A business has a current ratio of 1.75 : 1 and a quick (acid test) ratio of 1 : 1. The business sells stock on credit at its usual mark-up. What is the effect of this on the current ratio and quick (acid test) ratio? current ratio quick (acid test) ratio A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2006

Q8 · During the year ended 31 March 2006 a business made sales of $560 000 of which 25 % were… 9706/11 Oct/Nov 2006

24 During the year ended 31 March 2006 a business made sales of $560 000 of which 25 % were for cash. The trade debtors at 31 March 2005 were $52 000 and at 31 March 2006 they were $56 000. What is the debtors’ collection period based on average debtors? A 34 days B 35 days C 47 days D 49 days

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2006

Q9 · The following data is available: this year last year $ $ credit sales 60 000 50 000… 9706/11 Oct/Nov 2006

25 The following data is available: this year last year $ $ credit sales 60 000 50 000 credit purchases 40 000 28 000 creditors (average) 10 000 16 000 debtors (average) 12 000 8 000 Which statement is correct? A Debtors’ and creditors’ turnover ratios have improved. B Debtors’ and creditors’ turnover ratios have worsened. C Debtors are paying faster, but creditors are being paid more slowly. D Debtors are paying more slowly, but creditors are being paid faster.

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2006

Q10 · A company’s Profit and Loss Account showed a profit before interest of $128 000 9706/11 Oct/Nov 2006

26 A company’s Profit and Loss Account showed a profit before interest of $128 000. Interest paid was $8000. The table shows amounts included in the company’s Balance Sheet. $ fixed assets 485 000 net current assets 27 000 amounts falling due after one year: Debentures 80 000 How much is the return on the total capital employed? A 20.3 % B 21.6 % C 23.4 % D 25.0 %

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2006

Q11 · The capital structure of a company is shown 9706/11 May/June 2007

19 The capital structure of a company is shown. $ 700 000 ordinary shares of $0.25 each 175 000 8 % loan stocks 160 000 During the year the company made profits before interest of $105 000. The directors wish to distribute as much of the profits as possible by way of dividend. What is the dividend per share? A $0.1317 B $0.15 C $0.5268 D $0.60

1 marks

Answer: A

This question in 9706/11 May/June 2007

Q12 · What does the ratio of current assets / current liabilities show? 9706/11 May/June 2007

20 What does the ratio of current assets / current liabilities show? A asset usage B liquidity C profitability D return on capital employed

1 marks

Answer: B

This question in 9706/11 May/June 2007

Q13 · A business turns over its stock 5 times a year 9706/11 May/June 2007

21 A business turns over its stock 5 times a year. Average stock is $54 000 and sales are made at a mark-up of one third. How much are the sales? A $240 000 B $270 000 C $320 000 D $360 000

1 marks

Answer: D

This question in 9706/11 May/June 2007

Q14 · A company has the following information in its balance sheet: $000 taxation due 40… 9706/11 May/June 2007

22 A company has the following information in its balance sheet: $000 taxation due 40 debtors 150 bank overdraft 90 stock 110 proposed dividend 70 creditors 80 What is the liquidity (acid test or quick) ratio? A 0.54 : 1 B 0.88 : 1 C 0.93 : 1 D 1.85 : 1

1 marks

Answer: A

This question in 9706/11 May/June 2007

Q15 · A business has cash sales of $69 030 and credit sales of $1 406 070 in a year (360 days) 9706/11 May/June 2007

23 A business has cash sales of $69 030 and credit sales of $1 406 070 in a year (360 days). The debtors’ collection period is 40 days. What is the closing debtors’ balance? A $35 152 B $36 878 C $156 230 D $163 900

1 marks

Answer: C

This question in 9706/11 May/June 2007

Q16 · A firm has calculated the following accounting ratios for the year ended 30 June: year… 9706/11 May/June 2007

24 A firm has calculated the following accounting ratios for the year ended 30 June: year ended 30 June 2005 30 June 2006 gross profit on sales 30 % 33 % net profit on sales 15 % 14 % What could explain the changes in the percentages? A A fall in interest payments was equal to an increase in administration costs. B An increase in raw material costs was covered by an increase in selling price. C An increase in the advertising budget has allowed the firm to increase the selling price. D An increase in the advertising budget has led to a rise in sales volume.

1 marks

Answer: C

This question in 9706/11 May/June 2007

Q17 · A company’s sales are made evenly over a year (360 days) 9706/11 May/June 2008

20 A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash. The debtor balance is $26 700 and the debtor collection period is 30 days. What are the total sales (cash and credit) for the year? A $320 400 B $356 000 C $801 000 D $890 000

1 marks

Answer: B

This question in 9706/11 May/June 2008

Q18 · A business has a gross profit to sales ratio of 40 %, and a net profit to sales ratio of… 9706/11 May/June 2008

21 A business has a gross profit to sales ratio of 40 %, and a net profit to sales ratio of 10 %. If the sales volume increases by 8 % which of the following will generally be true? gross profit to net profit to sales ratio sales ratio A increase decrease B increase increase C unchanged decrease D unchanged increase

1 marks

Answer: D

This question in 9706/11 May/June 2008

Q19 · Which of the following correctly shows the effect of a company increasing the value of… 9706/11 May/June 2008

22 Which of the following correctly shows the effect of a company increasing the value of its freehold property? asset use ratio gearing A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: A

This question in 9706/11 May/June 2008

Q20 · What might cause working capital to fall? 9706/11 May/June 2008

23 What might cause working capital to fall? A an amount owing by a customer has turned out to be a bad debt B an old delivery van has been given in full exchange for a new computer C a payment of cash has been made to a trade creditor D new stock has been purchased on credit

1 marks

Answer: A

This question in 9706/11 May/June 2008

Q21 · The following information has been taken from a recent balance sheet of a business 9706/11 May/June 2008

24 The following information has been taken from a recent balance sheet of a business. $000 fixed assets 150 capital 170 current liabilities 5 What is the current ratio? A 3 : 1 B 4 : 1 C 5 : 1 D 6 : 1

1 marks

Answer: C

This question in 9706/11 May/June 2008

Q22 · Which ratio indicates how efficiently a company controls its overheads? 9706/11 Oct/Nov 2008

21 Which ratio indicates how efficiently a company controls its overheads? A current assets / current liabilities B gross profit / sales C net profit / sales D sales / capital employed

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2008

Q23 · The following information has been taken from a recent balance sheet 9706/11 Oct/Nov 2008

22 The following information has been taken from a recent balance sheet. fixed assets $30 000 working capital ratio 5 : 1 capital $34 000 current liabilities $1000 What is the amount of the current assets? A $1000 B $5000 C $6000 D $20 000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2008

Q24 · The following data is available at the end of a financial year 9706/11 Oct/Nov 2008

23 The following data is available at the end of a financial year. opening stock $500 000 purchases $2 250 000 closing stock $750 000 gross profit margin 50 % debtors collection period 60 days Sales are all on credit and accrue evenly over a 360-day accounting period. What is the value of debtors at the year-end? A $333 333 B $375 000 C $500 000 D $666 667

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2008

Q25 · The profit margins of a company over two years showed: 31 March 31 March year 1 year 2… 9706/11 Oct/Nov 2008

24 The profit margins of a company over two years showed: 31 March 31 March year 1 year 2 gross profit margin 37.2 % 39.1 % net profit margin 12.2 % 11.8 % What combination of factors could have caused these changes? A a change in the combination of goods sold leading to lower selling costs B a loss of trade discounts on purchases but an increase in cash discounts taken from suppliers C an advertising campaign to promote higher sales leading to higher selling prices D an increase in both production and selling costs

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2008

Q26 · A company profit and loss account includes: $000 dividend 300 increase in stock 200… 9706/11 May/June 2009

19 A company profit and loss account includes: $000 dividend 300 increase in stock 200 overheads 400 purchases 800 If the net profit percentage is 20 %, what is the figure for sales? A $1 120 000 B $1 250 000 C $1 625 000 D $1 750 000

1 marks

Answer: B

This question in 9706/11 May/June 2009

Q27 · Assets and liabilities of a business at its year end include the following information 9706/11 May/June 2009

22 Assets and liabilities of a business at its year end include the following information. $ accruals 5 000 bank overdraft 6 800 cash 600 prepayments 4 500 proposed dividend 12 000 stock 51 800 trade creditors 20 100 trade debtors 24 200 What is the current ratio? A 0.67 : 1 B 1.85 : 1 C 2.19 : 1 D 2.54 : 1

1 marks

Answer: B

This question in 9706/11 May/June 2009

Q28 · Which actions would improve the liquidity (acid test) ratio of a business in the short… 9706/11 May/June 2009

23 Which actions would improve the liquidity (acid test) ratio of a business in the short term? 1 debtors paying their debts 2 delaying paying creditors 3 selling a number of surplus fixed assets 4 selling stock A 1 and 2 B 2 and 3 C 1 and 4 D 3 and 4

1 marks

Answer: D

This question in 9706/11 May/June 2009

Q29 · A business has a debtor turnover period of 40 days based on year end debtors 9706/11 May/June 2009

24 A business has a debtor turnover period of 40 days based on year end debtors. Annual sales are $180 000 of which 13 % are cash sales. What is the year end debtors figure based on a year of 360 days? A $2600 B $17 400 C $20 000 D $45 200

1 marks

Answer: B

This question in 9706/11 May/June 2009

Q30 · A company has an issued ordinary share capital of 240 000 ordinary shares of $0.50 each 9706/11 May/June 2009

25 A company has an issued ordinary share capital of 240 000 ordinary shares of $0.50 each. The company pays a total ordinary share dividend of $9600. The current market price of an ordinary share is $3.20. What is the current dividend yield? A 1.25 % B 2 % C 4 % D 8 %

1 marks

Answer: A

This question in 9706/11 May/June 2009

Q31 · What will result in a reduction of working capital? 9706/11 Oct/Nov 2009

20 What will result in a reduction of working capital? A decreasing the rate of stock turnover B reducing the debtor collection period by offering discounts C reducing the time taken to pay suppliers D selling some surplus fixed assets

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2009

Q32 · A bank manager has reviewed the financial statements of a business 9706/11 Oct/Nov 2009

21 A bank manager has reviewed the financial statements of a business. He notes that the liquidity ratio has fallen but that the sales for the year have remained constant. What explains this fall in the liquidity ratio? A a decrease in stocks of finished goods B a decrease in the overdraft C an increase in cash D an increase in trade creditors

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2009

Q33 · The following information relates to the final accounts of a business 9706/11 Oct/Nov 2009

22 The following information relates to the final accounts of a business. $000 opening stock 2 470 closing stock 2 156 cost of sales for year 12 500 sales for year 21 660 What was the stock turnover in days? A 68 B 72 C 126 D 144

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2009

Q34 · A company has a share price that gives a dividend yield of 4 % 9706/11 Oct/Nov 2009

23 A company has a share price that gives a dividend yield of 4 %. Earnings per share are $0.32 and half the earnings are paid out as dividends. What is the share price? A $2.00 B $4.00 C $6.00 D $8.00

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2009

Q35 · What will result in a reduction of working capital? 9706/12 Oct/Nov 2009

19 What will result in a reduction of working capital? A decreasing the rate of stock turnover B reducing the debtor collection period by offering discounts C reducing the time taken to pay suppliers D selling some surplus fixed assets

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2009

Q36 · A bank manager has reviewed the financial statements of a business 9706/12 Oct/Nov 2009

20 A bank manager has reviewed the financial statements of a business. He notes that the liquidity ratio has fallen but that the sales for the year have remained constant. What explains this fall in the liquidity ratio? A a decrease in stocks of finished goods B a decrease in the overdraft C an increase in cash D an increase in trade creditors

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2009

Q37 · The following information relates to the final accounts of a business 9706/12 Oct/Nov 2009

21 The following information relates to the final accounts of a business. $000 opening stock 2 470 closing stock 2 156 cost of sales for year 12 500 sales for year 21 660 What was the stock turnover in days? A 68 B 72 C 126 D 144

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2009

Q38 · A company has a share price that gives a dividend yield of 4 % 9706/12 Oct/Nov 2009

22 A company has a share price that gives a dividend yield of 4 %. Earnings per share are $0.32 and half the earnings are paid out as dividends. What is the share price? A $2.00 B $4.00 C $6.00 D $8.00

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2009

Q39 · A company buys and re-sells goods 9706/11 May/June 2010

21 A company buys and re-sells goods. It has a higher gross profit margin than its rivals. Which reason could explain this? A Rival companies pay less for goods than the company. B Rival companies spend less on advertising than the company. C The company charges a higher selling price than its rivals. D The company charges a lower price than its rivals.

1 marks

Answer: C

This question in 9706/11 May/June 2010

Q40 · A business has trade payables (creditors) of $8000 and a bank overdraft of $2000 9706/11 May/June 2010

22 A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its current ratio is 2 : 1 and its quick (acid test) ratio is 1.5 : 1. What is the value of its inventory (stock)? A $4000 B $5000 C $28 000 D $35 000

1 marks

Answer: B

This question in 9706/11 May/June 2010

Q41 · A company’s sales during a 365 day year are shown in the table 9706/11 May/June 2010

23 A company’s sales during a 365 day year are shown in the table. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade receivables (debtors) turnover ratio at the year end is 42 days. What is the end-of-year trade receivables (debtors) balance? A $22 074 B $98 460 C $106 680 D $127 344

1 marks

Answer: C

This question in 9706/11 May/June 2010

Q42 · The following information is given about four products 9706/11 May/June 2010

24 The following information is given about four products. Which product makes the most gross profit? inventory (stock) average inventory mark up on cost turnover (per annum) (stock) in units % A 8 times 1000 15 B 6 times 1000 30 C 7 times 1000 25 D 10 times 1000 20

1 marks

Answer: D

This question in 9706/11 May/June 2010

Q43 · A company buys and re-sells goods 9706/12 May/June 2010

20 A company buys and re-sells goods. It has a higher gross profit margin than its rivals. Which reason could explain this? A Rival companies pay less for goods than the company. B Rival companies spend less on advertising than the company. C The Company charges a higher selling price than its rivals. D The Company charges a lower price than its rivals.

1 marks

Answer: C

This question in 9706/12 May/June 2010

Q44 · A business has trade payables (creditors) of $8000 and a bank overdraft of $2000 9706/12 May/June 2010

21 A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its current ratio is 2 : 1 and its quick (acid test) ratio is 1.5 : 1. What is the value of its inventory (stock)? A $4000 B $5000 C $28 000 D $35 000

1 marks

Answer: B

This question in 9706/12 May/June 2010

Q45 · A company’s sales during a 365 day year are shown in the table 9706/12 May/June 2010

22 A company’s sales during a 365 day year are shown in the table. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade receivables (debtors) turnover ratio at the year end is 42 days. What is the end-of-year trade receivables (debtors) balance? A $22 074 B $98 460 C $106 680 D $127 344

1 marks

Answer: C

This question in 9706/12 May/June 2010

Q46 · The following information is given about four products 9706/12 May/June 2010

23 The following information is given about four products. Which product makes the most gross profit? inventory (stock) average inventory mark up on cost turnover (per annum) (stock) in units % A 8 times 1000 15 B 6 times 1000 30 C 7 times 1000 25 D 10 times 1000 20

1 marks

Answer: D

This question in 9706/12 May/June 2010

Q47 · A company buys and re-sells goods 9706/13 May/June 2010

19 A company buys and re-sells goods. It has a higher gross profit margin than its rivals. Which reason could explain this? A Rival companies pay less for goods than the company. B Rival companies spend less on advertising than the company. C The Company charges a higher selling price than its rivals. D The Company charges a lower price than its rivals.

1 marks

Answer: C

This question in 9706/13 May/June 2010

Q48 · A business has trade payables (creditors) of $8000 and a bank overdraft of $2000 9706/13 May/June 2010

20 A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its current ratio is 2 : 1 and its quick (acid test) ratio is 1.5 : 1. What is the value of its inventory (stock)? A $4000 B $5000 C $28 000 D $35 000

1 marks

Answer: B

This question in 9706/13 May/June 2010

Q49 · A company’s sales during a 365 day year are shown in the table 9706/13 May/June 2010

21 A company’s sales during a 365 day year are shown in the table. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade receivables (debtors) turnover ratio at the year end is 42 days. What is the end-of-year trade receivables (debtors) balance? A $22 074 B $98 460 C $106 680 D $127 344

1 marks

Answer: C

This question in 9706/13 May/June 2010

Q50 · The following information is given about four products 9706/13 May/June 2010

22 The following information is given about four products. Which product makes the most gross profit? inventory (stock) average inventory mark up on cost turnover (per annum) (stock) in units % A 8 times 1000 15 B 6 times 1000 30 C 7 times 1000 25 D 10 times 1000 20

1 marks

Answer: D

This question in 9706/13 May/June 2010

Q51 · A business has current liabilities of $4000 at its year end 9706/11 Oct/Nov 2010

21 A business has current liabilities of $4000 at its year end. The quick (acid test) ratio is 1.5 : 1 The current ratio is 2.25 : 1 What is the value of inventory (stock) held at the year end? A $3000 B $4000 C $9000 D $15 000

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2010

Q52 · A company’s gross profit ratio for the year ended 31 December 2008 was 25 % 9706/11 Oct/Nov 2010

22 A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to 28 % for the year ended 31 December 2009. What could have been responsible for the increase? A an increase in the cost of purchases during 2009 B an increase in the volume of sales during 2009 C an over-valuation of inventory (stock) as at 31 December 2009 D an under-valuation of inventory (stock) as at 31 December 2009

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2010

Q53 · A business has the following assets and liabilities 9706/11 Oct/Nov 2010

23 A business has the following assets and liabilities. $000 $000 non current (fixed) assets 420 inventory (stocks) 120 trade receivables (debtors) 310 430 trade payables (creditors) (220) net current assets 210 total assets less current liabilities 630 long term loan (130) net assets 500 What is the business's quick (acid test) ratio? A 1.41 : 1 B 1.95 : 1 C 2.43 : 1 D 3.86 : 1

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2010

Q54 · The table shows the year end information for three companies 9706/11 Oct/Nov 2010

24 The table shows the year end information for three companies. sales operating profit as % capital employed company $ of all sales $ X 500 000 15 100 000 Y 200 000 8 40 000 Z 400 000 10 80 000 How should the companies rank in order of return on the actual capital employed? return on capital employed highest lowest A X Z Y B Y Z X C Z X Y D Z Y X

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2010

Q55 · A business has current liabilities of $4000 at its year end 9706/12 Oct/Nov 2010

21 A business has current liabilities of $4000 at its year end. The quick (acid test) ratio is 1.5 : 1 The current ratio is 2.25 : 1 What is the value of inventory (stock) held at the year end? A $3000 B $4000 C $9000 D $15 000

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2010

Q56 · A company’s gross profit ratio for the year ended 31 December 2008 was 25 % 9706/12 Oct/Nov 2010

22 A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to 28 % for the year ended 31 December 2009. What could have been responsible for the increase? A an increase in the cost of purchases during 2009 B an increase in the volume of sales during 2009 C an over-valuation of inventory (stock) as at 31 December 2009 D an under-valuation of inventory (stock) as at 31 December 2009

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2010

Q57 · A business has the following assets and liabilities 9706/12 Oct/Nov 2010

23 A business has the following assets and liabilities. $000 $000 non current (fixed) assets 420 inventory (stocks) 120 trade receivables (debtors) 310 430 trade payables (creditors) (220) net current assets 210 total assets less current liabilities 630 long term loan (130) net assets 500 What is the business's quick (acid test) ratio? A 1.41 : 1 B 1.95 : 1 C 2.43 : 1 D 3.86 : 1

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2010

Q58 · A business has current liabilities of $4000 at its year end 9706/13 Oct/Nov 2010

20 A business has current liabilities of $4000 at its year end. The quick (acid test) ratio is 1.5 : 1 The current ratio is 2.25 : 1 What is the value of inventory (stock) held at the year end? A $3000 B $4000 C $9000 D $15 000

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2010

Q59 · A company’s gross profit ratio for the year ended 31 December 2008 was 25 % 9706/13 Oct/Nov 2010

21 A company’s gross profit ratio for the year ended 31 December 2008 was 25 %. This increases to 28 % for the year ended 31 December 2009. What could have been responsible for the increase? A an increase in the cost of purchases during 2009 B an increase in the volume of sales during 2009 C an over-valuation of inventory (stock) as at 31 December 2009 D an under-valuation of inventory (stock) as at 31 December 2009

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2010

Q60 · A business has the following assets and liabilities 9706/13 Oct/Nov 2010

22 A business has the following assets and liabilities. $000 $000 non current (fixed) assets 420 inventory (stocks) 120 trade receivables (debtors) 310 430 trade payables (creditors) (220) net current assets 210 total assets less current liabilities 630 long term loan (130) net assets 500 What is the business's quick (acid test) ratio? A 1.41 : 1 B 1.95 : 1 C 2.43 : 1 D 3.86 : 1

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2010

Q61 · The table shows the year end information for three companies 9706/13 Oct/Nov 2010

23 The table shows the year end information for three companies. sales operating profit as % capital employed company $ of all sales $ X 500 000 15 100 000 Y 200 000 8 40 000 Z 400 000 10 80 000 How should the companies rank in order of return on the actual capital employed? return on capital employed highest lowest A X Z Y B Y Z X C Z X Y D Z Y X

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2010

Q62 · The following data is available at the end of a financial year 9706/11 May/June 2011

18 The following data is available at the end of a financial year. opening inventory $60 000 purchases $420 000 closing inventory $80 000 mark up 25 % trade receivables turnover 50 days Sales are all on credit and accrue evenly over the year. What is the amount of trade receivables at the end of the year (to the nearest $500)? A $55 000 B $57 500 C $68 500 D $72 000

1 marks

Answer: C

This question in 9706/11 May/June 2011

Q63 · The annual accounts of a business include the following 9706/11 May/June 2011

19 The annual accounts of a business include the following. $ revenue 160 000 opening inventory 10 000 closing inventory 14 000 Inventory turnover is 10 times. What is the gross profit? A $20 000 B $40 000 C $60 000 D $120 000

1 marks

Answer: B

This question in 9706/11 May/June 2011

Q64 · A company’s profit from operations was $128 000 9706/11 May/June 2011

20 A company’s profit from operations was $128 000. Interest payable was $8000. The following amounts were included in the company’s balance sheet. $ non-current assets 485 000 net current assets 27 000 non current liabilities 80 000 How much is the return on the total capital employed? A 20.3 % B 21.6 % C 23.4 % D 25.0 %

1 marks

Answer: D

This question in 9706/11 May/June 2011

Q65 · A business has $10 000 in the bank and buys inventory for $6000 paying by cheque 9706/11 May/June 2011

21 A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick (acid test) ratio? current ratio quick (acid test) ratio A decreases increases B decreases no effect C no effect decreases D no effect no effect

1 marks

Answer: C

This question in 9706/11 May/June 2011

Q66 · A company’s sales are made evenly over a year (360 days) 9706/11 May/June 2011

22 A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash, debtors total $26 700 and the trade receivables turnover period is 30 days. What are the total sales (cash and credit) for the year? A $320 400 B $356 000 C $801 000 D $890 000

1 marks

Answer: B

This question in 9706/11 May/June 2011

Q67 · A business sells goods at a mark up of 33.3 % 9706/11 May/June 2011

23 A business sells goods at a mark up of 33.3 %. Information for a year is given. $ revenue 600 000 opening inventory 53 000 closing inventory 68 000 What are the total purchases for the year? A $415 000 B $435 000 C $450 000 D $465 000

1 marks

Answer: D

This question in 9706/11 May/June 2011

Q68 · What is the main use of a computerised age analysis of debtors? 9706/12 May/June 2011

14 What is the main use of a computerised age analysis of debtors? A aid debt collection procedures B match sales invoices against orders C reconcile sales ledger balances D show credit notes issued

1 marks

Answer: A

This question in 9706/12 May/June 2011

Q69 · The annual accounts of a business include the following 9706/12 May/June 2011

18 The annual accounts of a business include the following. $ revenue 160 000 opening inventory 10 000 closing inventory 14 000 Inventory turnover is 10 times. What is the gross profit? A $20 000 B $40 000 C $60 000 D $120 000

1 marks

Answer: B

This question in 9706/12 May/June 2011

Q70 · A company’s profit from operations was $128 000 9706/12 May/June 2011

19 A company’s profit from operations was $128 000. Interest payable was $8000. The following amounts were included in the company’s balance sheet. $ non-current assets 485 000 net current assets 27 000 non current liabilities 80 000 How much is the return on the total capital employed? A 20.3 % B 21.6 % C 23.4 % D 25.0 %

1 marks

Answer: D

This question in 9706/12 May/June 2011

Q71 · A business has $10 000 in the bank and buys inventory for $6000 paying by cheque 9706/12 May/June 2011

20 A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick (acid test) ratio? current ratio quick (acid test) ratio A decreases increases B decreases no effect C no effect decreases D no effect no effect

1 marks

Answer: C

This question in 9706/12 May/June 2011

Q72 · The following data is available at the end of a financial year 9706/12 May/June 2011

21 The following data is available at the end of a financial year. opening inventory $60 000 purchases $420 000 closing inventory $80 000 mark up 25 % trade receivables turnover 50 days Sales are all on credit and accrue evenly over the year. What is the amount of trade receivables at the end of the year (to the nearest $500)? A $55 000 B $57 500 C $68 500 D $72 000

1 marks

Answer: C

This question in 9706/12 May/June 2011

Q73 · A company’s sales are made evenly over a year (360 days) 9706/12 May/June 2011

29 A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash, debtors total $26 700 and the trade receivables turnover period is 30 days. What are the total sales (cash and credit) for the year? A $320 400 B $356 000 C $801 000 D $890 000

1 marks

Answer: B

This question in 9706/12 May/June 2011

Q74 · What is the main use of a computerised age analysis of debtors? 9706/13 May/June 2011

10 What is the main use of a computerised age analysis of debtors? A aid debt collection procedures B match sales invoices against orders C reconcile sales ledger balances D show credit notes issued

1 marks

Answer: A

This question in 9706/13 May/June 2011

Q75 · The following data is available at the end of a financial year 9706/13 May/June 2011

19 The following data is available at the end of a financial year. opening inventory $60 000 purchases $420 000 closing inventory $80 000 mark up 25 % trade receivables turnover 50 days Sales are all on credit and accrue evenly over the year. What is the amount of trade receivables at the end of the year (to the nearest $500)? A $55 000 B $57 500 C $68 500 D $72 000

1 marks

Answer: C

This question in 9706/13 May/June 2011

Q76 · The annual accounts of a business include the following 9706/13 May/June 2011

20 The annual accounts of a business include the following. $ revenue 160 000 opening inventory 10 000 closing inventory 14 000 Inventory turnover is 10 times. What is the gross profit? A $20 000 B $40 000 C $60 000 D $120 000

1 marks

Answer: B

This question in 9706/13 May/June 2011

Q77 · A company’s profit from operations was $128 000 9706/13 May/June 2011

21 A company’s profit from operations was $128 000. Interest payable was $8000. The following amounts were included in the company’s balance sheet. $ non-current assets 485 000 net current assets 27 000 non current liabilities 80 000 How much is the return on the total capital employed? A 20.3 % B 21.6 % C 23.4 % D 25.0 %

1 marks

Answer: D

This question in 9706/13 May/June 2011

Q78 · A business has $10 000 in the bank and buys inventory for $6000 paying by cheque 9706/13 May/June 2011

22 A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick (acid test) ratio? current ratio quick (acid test) ratio A decreases increases B decreases no effect C no effect decreases D no effect no effect

1 marks

Answer: C

This question in 9706/13 May/June 2011

Q79 · A company’s sales are made evenly over a year (360 days) 9706/13 May/June 2011

23 A company’s sales are made evenly over a year (360 days). 10 % of the sales are for cash, debtors total $26 700 and the trade receivables turnover period is 30 days. What are the total sales (cash and credit) for the year? A $320 400 B $356 000 C $801 000 D $890 000

1 marks

Answer: B

This question in 9706/13 May/June 2011

Q80 · A business sells goods at a mark up of 33.3 % 9706/13 May/June 2011

24 A business sells goods at a mark up of 33.3 %. Information for a year is given. $ revenue 600 000 opening inventory 53 000 closing inventory 68 000 What are the total purchases for the year? A $415 000 B $435 000 C $450 000 D $465 000

1 marks

Answer: D

This question in 9706/13 May/June 2011

Q81 · A business has a gross profit ratio of 40 %, and a net profit ratio of 10 % 9706/11 Oct/Nov 2011

19 A business has a gross profit ratio of 40 %, and a net profit ratio of 10 %. The business has significant fixed costs. If the sales volume increases by 8 %, which of the following will generally be correct? gross profit ratio net profit ratio A increase decrease B increase increase C unchanged decrease D unchanged increase

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2011

Q82 · The following data is available for a business for the year ended 30 September 2010 9706/11 Oct/Nov 2011

20 The following data is available for a business for the year ended 30 September 2010. opening inventory $1 000 000 purchases for the year $2 500 000 closing inventory $1 500 000 mark up 50 % trade receivables collection period 60 days Sales are on credit and accrue evenly over a 360-day accounting period. What is the value of trade receivables at 30 September 2010? A $500 000 B $625 000 C $666 667 D $750 000

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2011

Q83 · A company is operating in a very competitive market 9706/11 Oct/Nov 2011

21 A company is operating in a very competitive market. Which ratios represent the reaction to the competition? gross profit period of credit percentage allowed to customers A 20 % 30 days B 20 % 60 days C 25 % 30 days D 25 % 60 days

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2011

Q84 · The balance sheet of a business at 30 June includes the following items: Year 1 Year 2… 9706/11 Oct/Nov 2011

22 The balance sheet of a business at 30 June includes the following items: Year 1 Year 2 trade receivables 47 000 63 000 other receivables 1 900 2 700 Total sales for Year 2 amounted to $450 000 of which $85 000 were cash sales. What is the average trade receivables collection period during the year ended 30 June Year 2? A 44 days B 51 days C 55 days D 63 days

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2011

Q85 · The opening inventory of a business is $10 000 and the cost of goods sold is $200 000 9706/11 Oct/Nov 2011

23 The opening inventory of a business is $10 000 and the cost of goods sold is $200 000. Using the average figure of opening and closing inventory, what value of closing inventory is needed to give an inventory turnover of 10 times? A $10 000 B $20 000 C $30 000 D $40 000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2011

Q86 · When is working capital most likely to increase? 9706/12 Oct/Nov 2011

18 When is working capital most likely to increase? A when the business increases its selling prices B when the credit period allowed to customers is reduced C when the credit period taken from suppliers is increased D when the value of inventory decreases

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2011

Q87 · A business has a rate of inventory turnover of 17 times a year 9706/12 Oct/Nov 2011

20 A business has a rate of inventory turnover of 17 times a year. What is the numerator in the calculation? A average inventory B closing inventory C cost of sales D credit sales

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2011

Q88 · The following items appear on a balance sheet 9706/12 Oct/Nov 2011

21 The following items appear on a balance sheet. $ inventory 20 000 balance at bank 2 000 cash in hand 1 500 trade payables 11 000 provision for doubtful debts 500 The current ratio is 3 : 1. How much do the trade receivables owe? A $9 500 B $10 000 C $12 000 D $12 500

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2011

Q89 · Which ratio measures a business’ average payment period? 9706/12 Oct/Nov 2011

22 Which ratio measures a business’ average payment period? A current ratio B liquid ratio C trade payables turnover D trade receivables turnover

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2011

Q90 · A firm has calculated the following accounting ratios for the year ended 30 June: year… 9706/12 Oct/Nov 2011

23 A firm has calculated the following accounting ratios for the year ended 30 June: year ended 30 June 2010 30 June 2011 gross profit on sales 30 % 33 % net profit on sales 15 % 14 % What could explain the changes in the percentages? A A fall in interest payments was equal to an increase in administration costs. B An increase in raw material costs was covered by an increase in selling price. C An increase in the advertising budget has allowed the firm to increase the selling price. D An increase in the advertising budget has led to a rise in sales volume.

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2011

Q91 · What is a limitation of the use of accounting information that is totally outside the… 9706/12 Oct/Nov 2011

24 What is a limitation of the use of accounting information that is totally outside the entity’s control? A changes in legal reporting requirements B changes in inventory valuation method C changes in total assets employed D changes in working capital

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2011

Q92 · A balance sheet shows the following information 9706/13 Oct/Nov 2011

17 A balance sheet shows the following information. $ 100 000 ordinary shares of $0.50 each 50 000 50 000 5 % preference shares of $0.10 each 5 000 share premium 10 000 revaluation reserve 20 000 retained earnings 35 000 120 000 What is the balance sheet value of one ordinary share? A $0.50 B $1.00 C $1.15 D $1.20

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2011

Q93 · A business has a gross profit ratio of 40 %, and a net profit ratio of 10 % 9706/13 Oct/Nov 2011

18 A business has a gross profit ratio of 40 %, and a net profit ratio of 10 %. The business has significant fixed costs. If the sales volume increases by 8 %, which of the following will generally be correct? gross profit ratio net profit ratio A increase decrease B increase increase C unchanged decrease D unchanged increase

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2011

Q94 · The following data is available for a business for the year ended 30 September 2010 9706/13 Oct/Nov 2011

19 The following data is available for a business for the year ended 30 September 2010. opening inventory $1 000 000 purchases for the year $2 500 000 closing inventory $1 500 000 mark up 50 % trade receivables collection period 60 days Sales are on credit and accrue evenly over a 360-day accounting period. What is the value of trade receivables at 30 September 2010? A $500 000 B $625 000 C $666 667 D $750 000

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2011

Q95 · A company is operating in a very competitive market 9706/13 Oct/Nov 2011

20 A company is operating in a very competitive market. Which ratios represent the reaction to the competition? gross profit period of credit percentage allowed to customers A 20 % 30 days B 20 % 60 days C 25 % 30 days D 25 % 60 days

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2011

Q96 · The balance sheet of a business at 30 June includes the following items: Year 1 Year 2… 9706/13 Oct/Nov 2011

21 The balance sheet of a business at 30 June includes the following items: Year 1 Year 2 trade receivables 47 000 63 000 other receivables 1 900 2 700 Total sales for Year 2 amounted to $450 000 of which $85 000 were cash sales. What is the average trade receivables collection period during the year ended 30 June Year 2? A 44 days B 51 days C 55 days D 63 days

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2011

Q97 · The opening inventory of a business is $10 000 and the cost of goods sold is $200 000 9706/13 Oct/Nov 2011

22 The opening inventory of a business is $10 000 and the cost of goods sold is $200 000. Using the average figure of opening and closing inventory, what value of closing inventory is needed to give an inventory turnover of 10 times? A $10 000 B $20 000 C $30 000 D $40 000

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2011

Q98 · A company purchases a product that costs $120 9706/11 May/June 2012

12 A company purchases a product that costs $120. The company expects to make a gross profit margin of one-third. What is the company’s mark-up? A $40 B $60 C $160 D $180

1 marks

Answer: B

This question in 9706/11 May/June 2012

Q99 · A company raises finance by issuing debentures 9706/11 May/June 2012

15 A company raises finance by issuing debentures. What is the effect on net current assets and short term profits? net current profits assets A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9706/11 May/June 2012

Q100 · A business finds that it is unable to pay its trade payables because of a poor cash flow 9706/11 May/June 2012

16 A business finds that it is unable to pay its trade payables because of a poor cash flow. What should it do to improve its cash flow? A factor its trade receivables B increase its trade receivables C increase its inventory D repay its overdraft

1 marks

Answer: A

This question in 9706/11 May/June 2012

Q101 · Which accounting ratio is used to assess working capital management? 9706/11 May/June 2012

17 Which accounting ratio is used to assess working capital management? A gross profit ratio B net profit ratio C rate of inventory turnover D return on capital employed

1 marks

Answer: C

This question in 9706/11 May/June 2012

Q102 · The following are extracts from a company’s financial statements 9706/11 May/June 2012

18 The following are extracts from a company’s financial statements. $ profit for the year before finance charges 100 000 issued share capital 200 000 reserves 80 000 non-current liabilities 260 000 What is the company’s return on capital employed? A 18.5 % B 21.7 % C 35.7 % D 50.0 %

1 marks

Answer: A

This question in 9706/11 May/June 2012

Q103 · Owusu Limited has a constant level of annual sales and a constant gross margin 9706/11 May/June 2012

19 Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the inventory increases. What effect does this have on inventory holding and inventory turnover? inventory holding inventory turnover (in days) (times) A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9706/11 May/June 2012

Q104 · Which item accounts for the difference between the current and liquid ratios? 9706/11 May/June 2012

20 Which item accounts for the difference between the current and liquid ratios? A cash and cash equivalents B inventory C trade payables D trade receivables

1 marks

Answer: B

This question in 9706/11 May/June 2012

Q105 · Arun wishes to invest in a business with a skilled workforce which will make a profit in… 9706/11 May/June 2012

21 Arun wishes to invest in a business with a skilled workforce which will make a profit in each of the next five years. Which aspect of financial statements helps Arun to decide where to invest? A Financial statements deal with past performance. B Historic cost is based on objective figures. C Non-monetary values are excluded. D Provisions can be based on estimates.

1 marks

Answer: B

This question in 9706/11 May/June 2012

Q106 · A company raises finance by issuing debentures 9706/12 May/June 2012

16 A company raises finance by issuing debentures. What is the effect on net current assets and short term profits? net current profits assets A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9706/12 May/June 2012

Q107 · A business finds that it is unable to pay its trade payables because of a poor cash flow 9706/12 May/June 2012

17 A business finds that it is unable to pay its trade payables because of a poor cash flow. What should it do to improve its cash flow? A factor its trade receivables B increase its trade receivables C increase its inventory D repay its overdraft

1 marks

Answer: A

This question in 9706/12 May/June 2012

Q108 · For some years a business has given 2 % cash discount to its customers and lost 3 % of… 9706/12 May/June 2012

18 For some years a business has given 2 % cash discount to its customers and lost 3 % of its inventory to pilferage by staff. On 1 January, the business changed the rate of cash discount to 5 % and introduced a new inventory control system that stopped the pilferage. Which effect do these changes have on the gross profit to sales ratio? change in new inventory cash discount control system A decrease no effect B increase no effect C no effect decrease D no effect increase

1 marks

Answer: D

This question in 9706/12 May/June 2012

Q109 · The table gives information about a company 9706/12 May/June 2012

19 The table gives information about a company. year 1 year 2 $ $ revenue 150 000 200 000 cost of sales 105 000 130 000 45 000 70 000 administration and distribution expenses 27 000 47 500 profit from operations 18 000 22 500 non-current assets 120 000 110 000 net current assets 30 000 40 000 non-current liabilities (50 000) (10 000) What happened to gross profit margin and return on capital employed in year 2? gross profit return on margin capital employed A decreased decreased B increased decreased C decreased increased D increased increased

1 marks

Answer: D

This question in 9706/12 May/June 2012

Q110 · A business turns over its inventory 5 times a year 9706/12 May/June 2012

20 A business turns over its inventory 5 times a year. Average inventory is $54 000 and sales are made at a mark-up of one-third. How much are the sales? A $202 500 B $270 000 C $360 000 D $405 000

1 marks

Answer: C

This question in 9706/12 May/June 2012

Q111 · What is not included in the calculation of the liquid ratio (acid test)? 9706/12 May/June 2012

21 What is not included in the calculation of the liquid ratio (acid test)? A accruals for rent B amounts prepaid for insurance C inventory of finished goods D trade payables

1 marks

Answer: C

This question in 9706/12 May/June 2012

Q112 · The owner of a business has to decide whether to sell a particular type of product 9706/12 May/June 2012

22 The owner of a business has to decide whether to sell a particular type of product. Which ratio is the most useful in making the decision? A current ratio B gross profit ratio C return on capital employed D trade receivables turnover

1 marks

Answer: B

This question in 9706/12 May/June 2012

Q113 · A company purchases a product that costs $120 9706/13 May/June 2012

13 A company purchases a product that costs $120. The company expects to make a gross profit margin of one-third. What is the company’s mark-up? A $40 B $60 C $160 D $180

1 marks

Answer: B

This question in 9706/13 May/June 2012

Q114 · A business has noticed a significant increase in its trade receivables collection period 9706/13 May/June 2012

17 A business has noticed a significant increase in its trade receivables collection period. What would be the most appropriate action to help the firm improve its liquidity position? A factoring B issue of shares C long-term bank loan D reducing sales

1 marks

Answer: A

This question in 9706/13 May/June 2012

Q115 · Which accounting ratio is used to assess working capital management? 9706/13 May/June 2012

18 Which accounting ratio is used to assess working capital management? A gross profit ratio B net profit ratio C rate of inventory turnover D return on capital employed

1 marks

Answer: C

This question in 9706/13 May/June 2012

Q116 · The following are extracts from a company’s financial statements 9706/13 May/June 2012

19 The following are extracts from a company’s financial statements. $ profit for the year before finance charges 100 000 issued share capital 200 000 reserves 80 000 non-current liabilities 260 000 What is the company’s return on capital employed? A 18.5 % B 21.7 % C 35.7 % D 50.0 %

1 marks

Answer: A

This question in 9706/13 May/June 2012

Q117 · Owusu Limited has a constant level of annual sales and a constant gross margin 9706/13 May/June 2012

20 Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the inventory increases. What effect does this have on inventory holding and inventory turnover? inventory holding inventory turnover (in days) (times) A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9706/13 May/June 2012

Q118 · Which item accounts for the difference between the current and liquid ratios? 9706/13 May/June 2012

21 Which item accounts for the difference between the current and liquid ratios? A cash and cash equivalents B inventory C trade payables D trade receivables

1 marks

Answer: B

This question in 9706/13 May/June 2012

Q119 · What does the current ratio show? 9706/11 Oct/Nov 2012

21 What does the current ratio show? A if inventory is being used efficiently B the profit that has been made C whether a business is able to pay its debts D whether revenue is likely to increase or decrease

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2012

Q120 · A company has the following year end information 9706/11 Oct/Nov 2012

22 A company has the following year end information. $000 credit purchases 320 credit sales 800 total purchases 440 total sales 900 trade payables 40 trade receivables 160 How long does the company take to pay its trade suppliers? A 34 days B 46 days C 65 days D 73 days

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2012

Q121 · The following information is extracted from a company's financial statements 9706/11 Oct/Nov 2012

23 The following information is extracted from a company's financial statements. income statement $000 profit from operations 200 finance charges (20) 180 taxation (70) profit for the year 110 statement of financial position $000 net assets 1 000 non-current liabilities (100) 900 share capital and reserves 900 What is the return on total capital employed? A 12.2 % B 18 % C 20 % D 22.2 %

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2012

Q122 · A company’s profit before finance charges has increased by 10 % in a year, whilst its… 9706/11 Oct/Nov 2012

24 A company’s profit before finance charges has increased by 10 % in a year, whilst its gross profit has only increased by 5 %. Which factors could explain this? 1 a decrease in finance charges 2 a decrease in selling and distribution expenses 3 an increase in rent received 4 an increase in selling prices A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2012

Q123 · A company has the following year end information 9706/12 Oct/Nov 2012

21 A company has the following year end information. $000 credit purchases 210 credit sales 630 total purchases 280 total sales 840 trade payables 30 trade receivables 80 How long do the company’s credit customers take to pay? A 35 days B 39 days C 47 days D 52 days

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2012

Q124 · A company has a current ratio of 2:1 9706/12 Oct/Nov 2012

22 A company has a current ratio of 2:1. Which transactions would always increase the ratio? 1 buying goods on credit 2 debtors paying their account to us 3 converting an overdraft to a long-term bank loan 4 selling non-current assets for cash A 1 and 2 B 1 and 3 C 2 and 3 D 3 and 4

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2012

Q125 · A company wants to increase its return on capital employed in the short-term 9706/12 Oct/Nov 2012

23 A company wants to increase its return on capital employed in the short-term. Which course of action will achieve this? A invest in new plant and machinery B reduce the level of dividends paid to investors C reduce the level of overhead expenses D revalue freehold land and buildings upwards

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2012

Q126 · Beatrice calculates some ratios to help her understand her financial statements 9706/12 Oct/Nov 2012

24 Beatrice calculates some ratios to help her understand her financial statements. What helps her interpretation of the ratios? A availability of previous results B changes in the economic conditions C her employment of an inexperienced book keeper D the fact that Beatrice is a sole trader

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2012

Q127 · A company published the financial statements for the year ending 31 December 2011, an… 9706/13 Oct/Nov 2012

21 A company published the financial statements for the year ending 31 December 2011, an extract of which is detailed below. $ retained earnings at 1 January 2011 90 000 profit for year 10 000 retained earnings at 31 December 2011 100 000 share capital 20 000 What is the return on capital employed based on average capital? A 8.70 % B 10.00 % C 11.11 % D 50.00 %

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2012

Q128 · Which transactions would decrease short term liquidity, as measured by the liquid (acid… 9706/13 Oct/Nov 2012

22 Which transactions would decrease short term liquidity, as measured by the liquid (acid test) ratio? 1 buying non-current assets for cash 2 buying inventory for cash 3 paying creditors using the bank overdraft 4 selling goods on credit A 1 and 2 B 1 and 3 C 2 and 3 D 3 and 4

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2012

Q129 · The following information relates to the financial statements of a business 9706/13 Oct/Nov 2012

23 The following information relates to the financial statements of a business. $000 opening inventory 2 470 closing inventory 2 156 cost of sales for year 12 500 revenue for year 21 660 What was the inventory turnover in days? A 39 B 63 C 68 D 72

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2012

Q130 · Acompany has the following gross profit and net profit ratios for two years 9706/13 Oct/Nov 2012

24 Acompany has the following gross profit and net profit ratios for two years. year 1 year 2 gross profit % 26 29 net profit % 13 10 The company’s turnover has remained unchanged for both years. What is a correct interpretation of these ratios? cost of sales overheads increased | decreased increased | decreased v x v x 00 DW > ~~ O® \ x x ~*~ KOM x v v

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2012

Q131 · Peter is a sole trader whose business is profitable 9706/11 May/June 2013

22 Peter is a sole trader whose business is profitable. He is considering going into partnership with Axel, another sole trader, to improve his liquidity. Which figure from Axel’s financial statements is of particular interest to Peter? A capital B current assets C net current assets D non-current assets

1 marks

Answer: C

This question in 9706/11 May/June 2013

Q132 · The profit margins of a company over two years showed the following 9706/11 May/June 2013

23 The profit margins of a company over two years showed the following. 31 March 31 March year 1 year 2 gross profit margin 37.2% 39.1% net profit margin 12.2% 11.8% Which combination of factors could have caused these changes? A a change in the combination of goods sold leading to lower selling costs B a loss of trade discounts on purchases but an increase in cash discounts taken from suppliers C an advertising campaign to promote higher sales leading to higher selling prices D an increase in both production and selling costs

1 marks

Answer: C

This question in 9706/11 May/June 2013

Q133 · A company has the following items on its statement of financial position 9706/11 May/June 2013

25 A company has the following items on its statement of financial position. $000 ordinary shares 12 000 10% preference shares 5 000 retained earnings 7 000 The company had made a profit of $5 000 000 of which $2 000 000 is paid in dividends, including $500 000 paid to preference shareholders. What is the return on capital employed? A 12.5% B 18.75% C 20.83% D 26.32%

1 marks

Answer: C

This question in 9706/11 May/June 2013

Q134 · A business provides the following financial information 9706/11 May/June 2013

26 A business provides the following financial information. $ opening inventory 24 000 closing inventory 32 000 cost of sales 140 000 sales 220 000 What is the inventory turnover? A 47 days B 54 days C 73 days D 84 days

1 marks

Answer: C

This question in 9706/11 May/June 2013

Q135 · Who is most likely to use an age analysis of debtors? 9706/12 May/June 2013

9 Who is most likely to use an age analysis of debtors? A cashier B credit controller C sales ledger supervisor D sales manager

1 marks

Answer: B

This question in 9706/12 May/June 2013

Q136 · A company has ordinary shares of $1 each 9706/12 May/June 2013

19 A company has ordinary shares of $1 each. Each year it pays a dividend of 10% of the nominal value of the shares. It now wishes to raise a further $120 000 by an issue of shares. This would bring in additional profit of $10 000 and dividends paid would increase by $2500 a year. At which price should the company issue the new shares to maintain the percentage of dividend? A $1.00 B $1.20 C $1.60 D $4.80

1 marks

Answer: D

This question in 9706/12 May/June 2013

Q137 · A company had a trade receivables collection period of 80 days in 2011 and 100 days in… 9706/12 May/June 2013

21 A company had a trade receivables collection period of 80 days in 2011 and 100 days in 2012. Total revenue was the same for both years. Which statement explains the change? A Customers took advantage of cash discounts. B Profit margins have improved. C Several major customers suffered cash flow problems. D The company entered into a debt factoring arrangement.

1 marks

Answer: C

This question in 9706/12 May/June 2013

Q138 · A company’s financial statements show the following 9706/12 May/June 2013

22 A company’s financial statements show the following. $ profit from operations 160 000 finance charges 40 000 ordinary share capital 500 000 retained earnings 250 000 debentures 300 000 What is the return on capital employed? A 15.2% B 16% C 21.3% D 24%

1 marks

Answer: A

This question in 9706/12 May/June 2013

Q139 · The following information has been taken from a statement of financial position 9706/12 May/June 2013

23 The following information has been taken from a statement of financial position. $ non-current assets 150 000 capital and reserves 170 000 current liabilities 5 000 What is the current ratio? A 3 : 1 B 4 : 1 C 5 : 1 D 6 : 1

1 marks

Answer: C

This question in 9706/12 May/June 2013

Q140 · The following shows extracts from the statement of financial position of a company 9706/13 May/June 2013

22 The following shows extracts from the statement of financial position of a company. at 30 September $ non-current assets 120 000 inventory 35 000 trade receivables 23 000 cash at bank (debit balance) 12 000 trade payables 15 000 bank loan repayable within 12 months 40 000 What is the acid test (liquid) ratio? A 0.64 : 1 B 1.27 : 1 C 2.33 : 1 D 4.67 : 1

1 marks

Answer: A

This question in 9706/13 May/June 2013

Q141 · A company’s non-current asset turnover ratio decreases this year compared to last year 9706/13 May/June 2013

23 A company’s non-current asset turnover ratio decreases this year compared to last year. Which single factor could cause this to happen? A an increase in sales B an increase in the rate of depreciation charged C purchase of non-current assets D sale of non-current assets

1 marks

Answer: C

This question in 9706/13 May/June 2013

Q142 · A company’s financial statements show the following 9706/13 May/June 2013

24 A company’s financial statements show the following. $ issued share capital 300 000 profit from operations 160 000 profit after preference dividends 120 000 non-current liabilities 280 000 reserves 100 000 What is the company’s return on capital employed? A 23.5% B 30.0% C 40.0% D 53.3%

1 marks

Answer: A

This question in 9706/13 May/June 2013

Q143 · What would increase the current ratio of a business? 9706/13 May/June 2013

25 What would increase the current ratio of a business? A buying goods on credit for $2000 and selling immediately for $3000 cash B paying creditors $1000 cash C purchasing a non-current asset of $10 000 on credit D selling goods of $1000 at cost price on credit

1 marks

Answer: A

This question in 9706/13 May/June 2013

Q144 · The following information was extracted from the books of a trader 9706/11 Oct/Nov 2013

21 The following information was extracted from the books of a trader. $ revenue for the year 126 000 purchases for the year 87 000 opening inventory 9 000 closing inventory 12 000 What is the rate of inventory turnover? A 4 times B 6 times C 8 times D 12 times

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2013

Q145 · A company wishes to improve its current ratio and its liquid (acid test) ratio 9706/11 Oct/Nov 2013

22 A company wishes to improve its current ratio and its liquid (acid test) ratio. How can this be done? A increasing discounts to trade receivables B increasing the provision for doubtful debts C purchasing additional inventory on credit D selling non-current assets

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2013

Q146 · Which of the following measures a business’ average credit period? 9706/11 Oct/Nov 2013

23 Which of the following measures a business’ average credit period? A current ratio B inventory turnover C liquid (acid test) ratio D trade receivables turnover

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2013

Q147 · A business is reviewing credit limits for its customers 9706/12 Oct/Nov 2013

21 A business is reviewing credit limits for its customers. What would result in a customer’s credit limit being reduced? A Cash discounts are always taken by the customer. B Sales have increased to that customer. C The customer always pays their debt on time. D The customer has lost a major contract.

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2013

Q148 · The trade receivables turnover for a company was 100 days in 2011 9706/12 Oct/Nov 2013

23 The trade receivables turnover for a company was 100 days in 2011. This reduced to 90 days in 2012, with no change in the sales revenue. Which statement explains this change? A Credit customers are paying earlier. B Credit customers are paying later. C Credit suppliers are being paid earlier. D Credit suppliers are being paid later.

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2013

Q149 · A company provides the following information 9706/12 Oct/Nov 2013

24 A company provides the following information. $ trade payables at start of year 38 000 trade payables at end of year 49 000 payments to credit suppliers 210 000 cost of sales 250 000 What was the trade payables turnover? A 72 days B 81 days C 86 days D 90 days

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2013

Q150 · On 1 May, a trader lost all of his inventory in a fire 9706/13 Oct/Nov 2013

22 On 1 May, a trader lost all of his inventory in a fire. He has figures for sales and purchases and wishes to calculate the value of the inventory lost. Which ratio should he use? A gross profit percentage B net profit percentage C trade payables turnover D trade receivables turnover

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2013

Q151 · The following information is available about two similar businesses 9706/13 Oct/Nov 2013

23 The following information is available about two similar businesses. X Y sales $30 000 $35 000 gross profit percentage 60% 62% net profit percentage 30% 8% Which business is better at controlling its costs? cost of sales expenses A X X B X Y C Y X D Y Y

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2013

Q152 · A business has a non-current asset turnover of two times, based on non-current assets… 9706/13 Oct/Nov 2013

24 A business has a non-current asset turnover of two times, based on non-current assets valued at $250 000 at the end of 2011. The company uses the reducing balance method to depreciate its non-current assets at 25% per annum. In 2012 sales revenue increased by 20%. There were no purchases or disposals of non-current assets during the year. What is the non-current asset turnover for 2012? A 2.13 times B 2.40 times C 2.67 times D 3.20 times

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2013

Q153 · Which basis should be used to calculate the amount of advertising to be charged to a… 9706/11 May/June 2014

13 Which basis should be used to calculate the amount of advertising to be charged to a store with two departments? A area of floor space B cost of non-current assets C number of sales staff D value of sales revenue

1 marks

Answer: D

This question in 9706/11 May/June 2014

Q154 · What is not considered a source of finance? 9706/11 May/June 2014

17 What is not considered a source of finance? A debentures B share capital C trade payables D trade receivables

1 marks

Answer: D

This question in 9706/11 May/June 2014

Q155 · The following financial information is available for a business 9706/11 May/June 2014

20 The following financial information is available for a business. All purchases and sales are made on credit. $ raw materials purchased 121 980 revenue 209 980 trade payables 45 448 trade receivables 28 765 What is the average collection period? A 50 days B 79 days C 86 days D 136 days

1 marks

Answer: A

This question in 9706/11 May/June 2014

Q156 · The following items appear on a statement of financial position 9706/11 May/June 2014

21 The following items appear on a statement of financial position. $ inventory 20 000 balance at bank 2 000 cash in hand 1 500 trade payables 11 000 provision for doubtful debts 500 The current ratio is 3 : 1. How much do the trade receivables owe? A $9500 B $10 000 C $12 000 D $12 500

1 marks

Answer: B

This question in 9706/11 May/June 2014

Q157 · A company’s financial statements show the following 9706/11 May/June 2014

22 A company’s financial statements show the following. $ profit before interest 125 378 profit for the year 120 426 200 000 shares $1 each 200 000 retained earnings 191 982 debentures 150 000 What is the return on capital employed (ROCE)? A 22.22% B 23.13% C 30.72% D 31.99%

1 marks

Answer: B

This question in 9706/11 May/June 2014

Q158 · The gross profit ratio of a business has increased 9706/11 May/June 2014

23 The gross profit ratio of a business has increased. Which statement is correct? A Inventories have decreased. B Purchases have been obtained at reduced cost. C Sales have increased. D Sales returns have decreased.

1 marks

Answer: B

This question in 9706/11 May/June 2014

Q159 · A company’s financial statements include the following 9706/12 May/June 2014

22 A company’s financial statements include the following. $ profit before interest 200 000 profit for the year 140 000 issued share capital 500 000 reserves 160 000 non-current liabilities 380 000 What is the return on capital employed? A 19.2% B 21.2% C 30.3% D 40.0%

1 marks

Answer: A

This question in 9706/12 May/June 2014

Q160 · A business sells a single product 9706/12 May/June 2014

23 A business sells a single product. This year the gross profit margin and net profit margin were both lower than last year. What is the reason for this change? A decrease in carriage out B decrease in sales returns C increase in carriage in D increase in purchases returns

1 marks

Answer: C

This question in 9706/12 May/June 2014

Q161 · The following information is given about four products 9706/12 May/June 2014

24 The following information is given about four products. Which product makes the most gross profit? inventory turnover average inventory mark up on cost (per annum) in units % A 8 times 1000 15 B 6 times 1000 30 C 7 times 1000 25 D 10 times 1000 20

1 marks

Answer: D

This question in 9706/12 May/June 2014

Q162 · A company’s non-current asset turnover figure rises from 3.4 times in Year 1 to 4 times… 9706/12 May/June 2014

25 A company’s non-current asset turnover figure rises from 3.4 times in Year 1 to 4 times in Year 2. Sales revenue has been constant. What explains the change? A The cost of repairs to non-current assets had decreased. B The cost of repairs to non-current assets had increased. C The depreciation charge for the year was higher than the cost of non-current assets purchased. D The depreciation charge for the year was lower than the cost of non-current assets purchased.

1 marks

Answer: C

This question in 9706/12 May/June 2014

Q163 · Gordon sells goods on credit to Sybil 9706/12 May/June 2014

26 Gordon sells goods on credit to Sybil. Which information from Sybil’s financial statements is of greatest interest to him? A current ratio B gross profit margin C mark up D return on capital employed

1 marks

Answer: A

This question in 9706/12 May/June 2014

Q164 · Which ratio would not assist in calculating the amount of stolen inventory? 9706/13 May/June 2014

12 Which ratio would not assist in calculating the amount of stolen inventory? A gross profit margin B mark up C rate of inventory turnover D return on capital employed

1 marks

Answer: D

This question in 9706/13 May/June 2014

Q165 · A business starts factoring its debts 9706/13 May/June 2014

21 A business starts factoring its debts. Which effect does this have on its current ratio and its short term cash flow? short term current ratio cash flow A decrease improve B decrease worsen C increase improve D increase worsen

1 marks

Answer: A

This question in 9706/13 May/June 2014

Q166 · A company provides the following information 9706/13 May/June 2014

22 A company provides the following information. profit for the year non-current $ asset turnover 2009 15 000 4 times 2010 16 000 3.5 times 2011 17 000 3 times Sales have remained constant throughout the three years. Which statement correctly describes the trend? A Profitability is decreasing and non-current assets are decreasing. B Profitability is decreasing and non-current assets are increasing. C Profitability is increasing and non-current assets are decreasing. D Profitability is increasing and non-current assets are increasing.

1 marks

Answer: D

This question in 9706/13 May/June 2014

Q167 · A business provided the following information 9706/13 May/June 2014

23 A business provided the following information. year 1: closing inventory $200 000; cost of goods sold $800 000. year 2: closing inventory is 25% higher than last year; cost of goods sold is 20% higher than last year. What is the inventory turnover in year 2? A 76 days B 86 days C 95 days D 103 days

1 marks

Answer: B

This question in 9706/13 May/June 2014

Q168 · The table shows extracts from the financial statements of a company: $ non-current assets… 9706/13 May/June 2014

24 The table shows extracts from the financial statements of a company: $ non-current assets at cost 750 000 non-current assets at net book value 610 000 profit for the year 190 000 revenue 1 380 000 What is the non-current asset turnover? A 0.31 times B 0.44 times C 1.84 times D 2.26 times

1 marks

Answer: D

This question in 9706/13 May/June 2014

Q169 · Radis Limited pays dividends on ordinary shares in the range of 8% to 12% each year 9706/11 Oct/Nov 2014

19 Radis Limited pays dividends on ordinary shares in the range of 8% to 12% each year. The current dividend is $20 000. The directors do not wish to increase this by more than 25% in the coming year. There are currently 400 000 ordinary shares of $0.50 each in issue. The company now wishes to issue more shares. What is the maximum number of shares it can issue while keeping its dividend in the usual range? A 8333 shares B 16 667 shares C 12 500 shares D 225 000 shares

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2014

Q170 · A business has $10 000 in the bank and buys inventory for $6000 paying by cheque 9706/11 Oct/Nov 2014

21 A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick (acid test) ratio? current ratio quick (acid test) ratio A decrease increase B decrease no effect C no effect decrease D no effect no effect

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2014

Q171 · A supplier wishes to see the financial statements of a customer to help decide whether to… 9706/11 Oct/Nov 2014

22 A supplier wishes to see the financial statements of a customer to help decide whether to continue trading with him. Which figure would be most useful in making that decision? A closing inventory B inventory turnover C trade payables turnover D trade receivables turnover

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2014

Q172 · A business increased its sales revenue by 50% in one year whilst its cost of sales has… 9706/11 Oct/Nov 2014

23 A business increased its sales revenue by 50% in one year whilst its cost of sales has increased by 60% over the same period. What is the explanation for the change in profit margin? A an increase in marketing expenses B an increase in sales price C an increase in sales volume D an increase in supplier price

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2014

Q173 · A business has a year end of 31 December 9706/11 Oct/Nov 2014

24 A business has a year end of 31 December. It expects to achieve sales in 2014 of $450 000. On 31 December 2013 its non-current assets were $306 000. On 1 July 2014 it purchased new machinery at a cost of $180 000, in order to increase its sales by an extra $20 000 each month. What is the expected rate of non-current asset turnover in 2014? (Ignore depreciation.) A 1.17 times B 1.42 times C 1.44 times D 1.74 times

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2014

Q174 · A business has the following information for the past two financial years 9706/12 Oct/Nov 2014

18 A business has the following information for the past two financial years. year 1: average inventory $100 000; revenue $800 000; gross margin 25%. year 2: average inventory $140 000; revenue $1 200 000; gross margin 30% What is the inventory turnover in year 2? A 37 days B 43 days C 52 days D 61 days

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2014

Q175 · The draft accounts of a business for the year ended 30 June 2013 include the following: $… 9706/12 Oct/Nov 2014

19 The draft accounts of a business for the year ended 30 June 2013 include the following: $ revenue 280 000 gross profit 60 000 It was subsequently discovered that the closing inventory was understated by $10 000. What was the gross profit percentage after correcting this error? A 17.9% B 20.7% C 21.4% D 25.0%

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2014

Q176 · The following financial information is available 9706/12 Oct/Nov 2014

20 The following financial information is available. $ trade payables 10 000 bank overdraft 4 400 trade receivables 20 000 other receivables 600 other payables 1 600 non-current liabilities 5 000 The business has a current ratio of 2.5 : 1. What is the value of inventory? A $15 900 B $16 900 C $19 400 D $31 900

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2014

Q177 · Analysis of a business’s financial statements shows the following 9706/12 Oct/Nov 2014

21 Analysis of a business’s financial statements shows the following. net profit ratio inventory turnover (%) (days) 2011 21 62 2012 23 58 2013 26 53 Revenue has stayed the same over the three years. Which statement is correct? A Profitability is decreasing and inventory is decreasing. B Profitability is decreasing and inventory is increasing. C Profitability is increasing and inventory is decreasing. D Profitability is increasing and inventory is increasing.

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2014

Q178 · X Limited and Y Limited both started trading on 1 January 2001 9706/12 Oct/Nov 2014

22 X Limited and Y Limited both started trading on 1 January 2001. Each year, both businesses had a profit from operations of $20 000. On 31 December 2013 retained earnings were as follows: $ X Limited 145 000 Y Limited 95 000 Which statement explains the difference? A X Limited has transferred higher amounts to general reserve. B X Limited pays a higher dividend per share. C Y Limited has fewer shares in issue. D Y Limited has a higher level of debt.

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2014

Q179 · Who will be most interested in a business maximising its profitability? 9706/12 Oct/Nov 2014

23 Who will be most interested in a business maximising its profitability? A customers B general public C investors D suppliers

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2014

Q180 · A company’s sales revenue has increased by 40% in a period, but its gross profit has only… 9706/12 Oct/Nov 2014

24 A company’s sales revenue has increased by 40% in a period, but its gross profit has only increased by 30%. Which factors could explain this? 1 a decrease in the cost of sales 2 a decrease in selling price per unit 3 an increase in administration expenses 4 an increase in purchase price per unit A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2014

Q181 · A company has the following assets and liabilities 9706/13 Oct/Nov 2014

23 A company has the following assets and liabilities. current assets $ current liabilities $ inventory 55 000 trade payables 62 000 trade receivables 60 000 other payables 38 000 bank 40 000 non-current liabilities 10% debenture (2025) 40 000 What is the liquid (acid test) ratio? A 0.714 : 1 B 0.967 : 1 C 1 : 1 D 1.55 : 1

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2014

Q182 · A business has the following current assets and current liabilities 9706/13 Oct/Nov 2014

24 A business has the following current assets and current liabilities. $ trade receivables 6000 bank overdraft 1500 cash in hand 50 trade payables 5050 The only other item in the working capital is inventory. The current ratio is 2 : 1. What is the value of the inventory? A $2550 B $4050 C $5550 D $7050

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2014

Q183 · The following information has been extracted from the financial statements of a sole… 9706/13 Oct/Nov 2014

25 The following information has been extracted from the financial statements of a sole trader for the year ended 31 March. $ $ revenue 198 200 opening inventory 22 200 purchases 86 900 purchase returns (2 600) carriage inwards 1 400 107 900 closing inventory (25 300) 82 600 gross profit 115 600 What is the inventory turnover for the year ended 31 March? A 100 days B 105 days C 107 days D 112 days

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2014

Q184 · The following figures have been extracted from the financial statements of a business 9706/11 May/June 2015

9 The following figures have been extracted from the financial statements of a business. $ trade receivables 45 000 provision for doubtful debts 2 000 bad debts from previous year written off 1 000 The trade receivable days were 71.1 days. What was the figure of credit sales for the year to the nearest dollar? A $215 612 B $220 745 C $231 013 D $241 280

1 marks

Answer: C

This question in 9706/11 May/June 2015

Q185 · Why does a business have a higher gross profit margin than its rivals? 9706/11 May/June 2015

18 Why does a business have a higher gross profit margin than its rivals? A Its rivals pay less for goods. B Its rivals pay more for goods. C Its rivals spend less on advertising. D Its rivals spend more on advertising.

1 marks

Answer: B

This question in 9706/11 May/June 2015

Q186 · How is mark up calculated? 9706/11 May/June 2015

19 How is mark up calculated? A gross profit / cost of sales × 100 B gross profit / revenue × 100 C profit for the year / cost of sales × 100 D profit for the year / revenue × 100

1 marks

Answer: A

This question in 9706/11 May/June 2015

Q187 · A business has a gross profit ratio (margin) of 40%, and a net profit ratio (percentage)… 9706/11 May/June 2015

20 A business has a gross profit ratio (margin) of 40%, and a net profit ratio (percentage) of 10%. The business has significant fixed costs. Sales volume increases by 8%. How will the ratios be affected? gross profit ratio net profit ratio (margin) (percentage) A increase decrease B increase increase C unchanged decrease D unchanged increase

1 marks

Answer: D

This question in 9706/11 May/June 2015

Q188 · Petra supplies goods on credit to Ashy Limited 9706/11 May/June 2015

21 Petra supplies goods on credit to Ashy Limited. What is Petra’s main interest in considering Ashy Limited’s financial statements? A to discover its historic trend in profitability B to establish its level of liquidity C to examine its capital structure D to find out about its dividend payments

1 marks

Answer: B

This question in 9706/11 May/June 2015

Q189 · A company’s gross profit ratio (margin) for the year ended 31 December 2013 was 25% 9706/12 May/June 2015

20 A company’s gross profit ratio (margin) for the year ended 31 December 2013 was 25%. This increases to 28% for the year ended 31 December 2014. What could have been responsible for the increase? A an increase in the cost of purchases during 2014 B an increase in the volume of sales during 2014 C an over-valuation of inventory at 31 December 2014 D an under-valuation of inventory at 31 December 2014

1 marks

Answer: C

This question in 9706/12 May/June 2015

Q190 · Which ratio will give the best indication of short term liquidity? 9706/12 May/June 2015

21 Which ratio will give the best indication of short term liquidity? A current ratio B liquid (acid test) ratio C trade payables turnover (days) D trade receivables turnover (days)

1 marks

Answer: B

This question in 9706/12 May/June 2015

Q191 · An investor is looking at the financial statements of a company in which he may decide to… 9706/12 May/June 2015

22 An investor is looking at the financial statements of a company in which he may decide to invest. Which item helps him to rely on the financial statements? A consistency of accounting policies from one period to the next B estimation of accounting provisions relying on the opinion of managers C inflation in the currency in which the financial statements are prepared D lapse of time since the date of the statement of financial position

1 marks

Answer: A

This question in 9706/12 May/June 2015

Q192 · A business provides the following information 9706/13 May/June 2015

18 A business provides the following information. $ revenue 600 000 raw materials purchased 400 000 trade payables 40 000 trade receivables 50 000 90% of revenue is from credit sales. 80% of purchases are on credit terms. How long, to the nearest day, does the business take to pay suppliers who give it credit? A 31 days B 34 days C 37 days D 46 days

1 marks

Answer: D

This question in 9706/13 May/June 2015

Q193 · A trader provides the following information for the year 9706/13 May/June 2015

19 A trader provides the following information for the year. inventory 1 January $15 125 inventory 31 December $22 185 ordinary goods purchased $65 500 gross profit % on sales 25% What is the value of sales for the year? A $73 050 B $77 920 C $90 700 D $96 747

1 marks

Answer: B

This question in 9706/13 May/June 2015

Q194 · A business provides the following information 9706/13 May/June 2015

20 A business provides the following information. $ opening inventory 15 000 purchases 120 000 closing inventory (25 000) 110 000 What is the rate of inventory turnover? A 4.4 times B 4.8 times C 5.5 times D 6.0 times

1 marks

Answer: C

This question in 9706/13 May/June 2015

Q195 · A business provides the following information about its rate of inventory turnover 9706/13 May/June 2015

21 A business provides the following information about its rate of inventory turnover. year 1 10 times year 2 8 times The selling price per unit has remained constant. Which statements are correct? 1 Inventory of goods has decreased in relation to units sold. 2 Inventory of goods has increased in relation to units sold. 3 Profit margin on a constant level of sales has decreased. 4 Profit margin on a constant level of sales has increased. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: D

This question in 9706/13 May/June 2015

Q196 · A decrease in which ratio indicates a better performance for a business? 9706/11 Oct/Nov 2015

25 A decrease in which ratio indicates a better performance for a business? A inventory turnover in days B non-current asset turnover C return on capital employed D trade payables turnover

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2015

Q197 · When is working capital most likely to increase? 9706/12 Oct/Nov 2015

22 When is working capital most likely to increase? A when the business increases its selling prices B when the credit period allowed to customers is reduced C when the credit period taken from suppliers is increased D when the value of inventory decreases

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2015

Q198 · John failed to write off a bad debt of $8000 9706/12 Oct/Nov 2015

23 John failed to write off a bad debt of $8000. What was the effect of this omission? A His trade payables turnover (in days) was overstated. B His trade payables turnover (in days) was understated. C His trade receivables turnover (in days) was overstated. D His trade receivables turnover (in days) was understated.

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2015

Q199 · A company raises cash by issuing 8% debentures 9706/13 Oct/Nov 2015

19 A company raises cash by issuing 8% debentures. What is the effect on the company’s profits and equity in the year of issue? profits equity A decrease decrease B decrease no effect C increase decrease D increase no effect

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2015

Q200 · A company has a current ratio of 2 : 1 9706/13 Oct/Nov 2015

21 A company has a current ratio of 2 : 1. Its bank balance is $80 000 debit and its current liabilities are $200 000. It then issues 50 000 new ordinary shares of $1 each at a premium of $0.10 per share. What is the new current ratio? A 2.25 : 1 B 2.28 : 1 C 2.67 : 1 D 2.76 : 1

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2015

Q201 · During the year ended 31 March 2015, a business made sales of $560 000 of which 25% were… 9706/13 Oct/Nov 2015

22 During the year ended 31 March 2015, a business made sales of $560 000 of which 25% were for cash. The trade receivables at 31 March 2014 were $52 000 and at 31 March 2015 they were $56 000. What is the trade receivables turnover based on average trade receivables? A 34 days B 36 days C 47 days D 49 days

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2015

Q202 · What is measured by the return on capital employed ratio? 9706/12 Feb/March 2016

19 What is measured by the return on capital employed ratio? A percentage of profit paid out as dividends only B percentage of profit paid out as dividends and interest C return earned on funds invested by business owners only D return earned on funds invested by business owners and long-term lenders

1 marks

Answer: D

This question in 9706/12 Feb/March 2016

Q203 · The following ratios have been calculated for two businesses, both with the same revenue… 9706/12 Feb/March 2016

20 The following ratios have been calculated for two businesses, both with the same revenue of $100 000. X Y gross margin 20% 25% profit margin 10% 10% How do the cost of sales and expenses of X compare with those of Y? cost of sales expenses A higher higher B higher lower C lower higher D lower lower

1 marks

Answer: B

This question in 9706/12 Feb/March 2016

Q204 · A business provides the following information 9706/12 Feb/March 2016

21 A business provides the following information. gross margin 20% $ sales 275 325 opening inventory 25 450 closing inventory 55 975 What are the purchases? A $189 735 B $220 260 C $250 785 D $259 963

1 marks

Answer: C

This question in 9706/12 Feb/March 2016

Q205 · A company provides the following information 9706/11 May/June 2016

21 A company provides the following information. $ ordinary share capital 50 000 retained earnings at the end of the year 11 000 8% debentures (2020-2022) 15 000 bank overdraft 8 000 profit from operations 17 700 profit for the year 16 500 What is the return on capital employed? A 21.07% B 21.71% C 23.29% D 27.05%

1 marks

Answer: C

This question in 9706/11 May/June 2016

Q206 · A business purchases inventory by cash 9706/11 May/June 2016

22 A business purchases inventory by cash. Which effects will this have on liquidity ratios? current ratio liquid (acid test) ratio A decrease decrease B decrease increase C no change decrease D no change increase

1 marks

Answer: C

This question in 9706/11 May/June 2016

Q207 · X supplies goods on credit 9706/11 May/June 2016

23 X supplies goods on credit. He looked at the financial statements of two other businesses to see if he wanted to trade with them. He found the following information. credit purchases trade payables business $ $ G 21 800 2320 H 49 500 5750 X only trades with businesses with a trade payables turnover of 42 days or less. With which business(es) did X decide to trade? A both G and H B G only C H only D neither G nor H

1 marks

Answer: B

This question in 9706/11 May/June 2016

Q208 · A company’s profit from operations has increased by 10% in a year, whilst its gross… 9706/12 May/June 2016

15 A company’s profit from operations has increased by 10% in a year, whilst its gross profit has only increased by 5%. Which factors could explain this? 1 a decrease in finance costs 2 a decrease in distribution costs 3 an increase in rent received 4 an increase in selling prices A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

1 marks

Answer: C

This question in 9706/12 May/June 2016

Q209 · A company has 1 000 000 ordinary shares of $1 issued at $2.50 9706/12 May/June 2016

16 A company has 1 000 000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of $300 000. Profit from operations for the year was $465 000. The directors paid an 8% ordinary share dividend during the year. By which amount did the retained earnings increase during the year? A $250 000 B $370 000 C $385 000 D $400 000

1 marks

Answer: B

This question in 9706/12 May/June 2016

Q210 · A company wants to increase its return on capital employed in the short term 9706/12 May/June 2016

19 A company wants to increase its return on capital employed in the short term. Which course of action will achieve this? A invest in new plant and machinery B make a bonus issue of shares C reduce overhead expenses D reduce the dividends paid to investors

1 marks

Answer: C

This question in 9706/12 May/June 2016

Q211 · Which item is included in the current ratio but not the liquid (acid test) ratio? 9706/12 May/June 2016

20 Which item is included in the current ratio but not the liquid (acid test) ratio? A cash at bank B inventory C trade payables D trade receivables

1 marks

Answer: B

This question in 9706/12 May/June 2016

Q212 · A business has prepared the following information for the year ended 30 April 2015 9706/12 May/June 2016

21 A business has prepared the following information for the year ended 30 April 2015. $ $ revenue 220 000 opening inventory 25 000 purchases 120 000 closing inventory (31 000) cost of goods sold 114 000 gross profit 106 000 What was the inventory turnover? A 86 days B 90 days C 95 days D 100 days

1 marks

Answer: B

This question in 9706/12 May/June 2016

Q213 · A company provides the following information 9706/13 May/June 2016

21 A company provides the following information. $ ordinary share capital 50 000 retained earnings at the end of the year 11 000 8% debentures (2020-2022) 15 000 bank overdraft 8 000 profit from operations 17 700 profit for the year 16 500 What is the return on capital employed? A 21.07% B 21.71% C 23.29% D 27.05%

1 marks

Answer: C

This question in 9706/13 May/June 2016

Q214 · A business purchases inventory by cash 9706/13 May/June 2016

22 A business purchases inventory by cash. Which effects will this have on liquidity ratios? current ratio liquid (acid test) ratio A decrease decrease B decrease increase C no change decrease D no change increase

1 marks

Answer: C

This question in 9706/13 May/June 2016

Q215 · X supplies goods on credit 9706/13 May/June 2016

23 X supplies goods on credit. He looked at the financial statements of two other businesses to see if he wanted to trade with them. He found the following information. credit purchases trade payables business $ $ G 21 800 2320 H 49 500 5750 X only trades with businesses with a trade payables turnover of 42 days or less. With which business(es) did X decide to trade? A both G and H B G only C H only D neither G nor H

1 marks

Answer: B

This question in 9706/13 May/June 2016

Q216 · In 2014 a company was entirely financed by its equity and reserves which total $1 000 000 9706/11 Oct/Nov 2016

20 In 2014 a company was entirely financed by its equity and reserves which total $1 000 000. Its return on capital employed was 28%. On 1 January 2015 the company issued a 10% debenture of $300 000. During 2015 the profit from operations increased by 20%. No dividends were paid. What was the return on capital employed for 2015? A 19.1% B 20.9% C 23.4% D 25.8%

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2016

Q217 · Which action will improve the current ratio? 9706/11 Oct/Nov 2016

21 Which action will improve the current ratio? A providing a cash discount to trade receivables B requesting a longer payment period from suppliers C selling non-current assets for cash D increasing a bank overdraft

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2016

Q218 · Raj, a supplier of goods, has calculated the following ratios from the financial… 9706/11 Oct/Nov 2016

22 Raj, a supplier of goods, has calculated the following ratios from the financial statements of a possible new customer. 1 current ratio 2 non-current asset turnover 3 trade payables turnover 4 trade receivables turnover Which ratios would help Raj decide whether or not to supply goods? A 1 and 2 B 1 and 3 C 2 and 3 D 3 and 4

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2016

Q219 · Which action leaves the value of working capital unchanged? 9706/12 Oct/Nov 2016

20 Which action leaves the value of working capital unchanged? A disposal of a non-current asset B issuing shares for cash C purchasing goods for resale on credit D writing off an irrecoverable debt

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2016

Q220 · Owusu Limited has a constant level of annual sales and a constant gross margin 9706/12 Oct/Nov 2016

21 Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the inventory increases. Which effects does this have on the inventory holding period and on inventory turnover? inventory holding inventory turnover (in days) (times) A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2016

Q221 · A business has calculated inventory turnover ratio as 8 times 9706/13 Oct/Nov 2016

10 A business has calculated inventory turnover ratio as 8 times. Opening inventory was $25 000 and closing inventory was $28 000. What is the value of purchases? A $209 000 B $215 000 C $221 000 D $227 000

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2016

Q222 · Which ratio indicates how efficiently a company controls its overheads? 9706/13 Oct/Nov 2016

20 Which ratio indicates how efficiently a company controls its overheads? A current ratio B gross margin C profit margin D trade receivables turnover

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2016

Q223 · A company produces the following information 9706/13 Oct/Nov 2016

21 A company produces the following information. profit from operations 98 000 profit for the year 91 000 equity at the end of the year 500 000 long-term bank loan 150 000 What is the return on capital employed? A 14% B 15.08% C 18.2% D 19.6%

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2016

Q224 · The table shows year end information for a company 9706/12 Feb/March 2017

17 The table shows year end information for a company. income statement $ statement of financial position $ profit from operations 14 000 5% debenture 2020 30 000 finance costs (1 500) ordinary share capital 70 000 loss on disposal of non-current asset (2 500) share premium account 15 000 profit for the year 10 000 retained earnings 35 000 What is the return on capital employed (ROCE)? A 6.7% B 8.3% C 9.3% D 11.7%

1 marks

Answer: C

This question in 9706/12 Feb/March 2017

Q225 · A company provided the following information 9706/12 Feb/March 2017

18 A company provided the following information. $ revenue for the year 390 000 year-end non-current assets at cost 260 000 year-end accumulated depreciation 65 000 What was the non-current asset turnover? A 0.5 times B 0.67 times C 1.5 times D 2 times

1 marks

Answer: D

This question in 9706/12 Feb/March 2017

Q226 · On 1 May, a trader lost all of his inventory in a fire 9706/11 May/June 2017

17 On 1 May, a trader lost all of his inventory in a fire. He has values for sales and purchases and wishes to calculate the value of the inventory lost. Which ratio should he use? A gross margin B profit margin C trade payables turnover D trade receivables turnover

1 marks

Answer: A

This question in 9706/11 May/June 2017

Q227 · The following information was available for a business 9706/11 May/June 2017

18 The following information was available for a business. $ equity 90 625 non-current liabilities 36 250 profit from operations 24 375 profit for the year 18 125 What was the return on capital employed? A 14.3% B 19.2% C 20% D 26.9%

1 marks

Answer: B

This question in 9706/11 May/June 2017

Q228 · A business provided the following information 9706/11 May/June 2017

19 A business provided the following information. $ non-current assets at cost 525 000 non-current assets at net book value 350 000 revenue 800 000 profit for the year 160 000 What was the non-current asset turnover? A 0.30 times B 0.46 times C 1.52 times D 2.29 times

1 marks

Answer: D

This question in 9706/11 May/June 2017

Q229 · A company’s sales during a 365-day year are shown 9706/11 May/June 2017

20 A company’s sales during a 365-day year are shown. $ cash sales 179 580 credit sales 927 100 total sales 1 106 680 The trade receivables turnover was 42 days. What was the value of trade receivables at the end of the year? A $20 664 B $22 074 C $106 680 D $127 344

1 marks

Answer: C

This question in 9706/11 May/June 2017

Q230 · Who are internal users of accounting information? 9706/12 May/June 2017

18 Who are internal users of accounting information? A customers B directors C lenders D shareholders

1 marks

Answer: B

This question in 9706/12 May/June 2017

Q231 · A company provides the following information 9706/12 May/June 2017

19 A company provides the following information. $ profit from operations 16 000 finance costs 4 000 ordinary share capital ($1 shares) 50 000 non-current liabilities 4 000 retained earnings 20 000 What is the return on capital employed? A 16.22% B 17.14% C 21.62% D 22.86%

1 marks

Answer: C

This question in 9706/12 May/June 2017

Q232 · The following financial information is available for a business 9706/12 May/June 2017

20 The following financial information is available for a business. All purchases and sales are made on credit. $ purchases 121 980 revenue 209 980 trade payables 45 448 trade receivables 28 765 What is the average collection period? A 50 days B 79 days C 86 days D 136 days

1 marks

Answer: A

This question in 9706/12 May/June 2017

Q233 · The following items appear on a statement of financial position 9706/13 May/June 2017

18 The following items appear on a statement of financial position. $ inventory 20 000 balance at bank 2 000 cash in hand 1 500 trade payables 11 000 provision for doubtful debts 500 The current ratio is 3 : 1. How much do the trade receivables owe? A $9500 B $10 000 C $12 000 D $12 500

1 marks

Answer: B

This question in 9706/13 May/June 2017

Q234 · A company’s financial statements show the following 9706/13 May/June 2017

19 A company’s financial statements show the following. $ sales 570 000 cost of goods sold 210 000 operating expenses 65 000 non-current assets 250 000 capital employed 310 000 What is the non-current asset turnover? A 1.18 times B 1.24 times C 1.44 times D 2.28 times

1 marks

Answer: D

This question in 9706/13 May/June 2017

Q235 · A company’s capital employed consists of ordinary shares of $1 each and retained earnings… 9706/11 Oct/Nov 2017

15 A company’s capital employed consists of ordinary shares of $1 each and retained earnings of $50 000. The following information is available for the year ended 31 December. $ profit from operations 47 000 finance costs 3 000 profit for the year 44 000 Return on capital employed was 10%. How many ordinary shares had been issued? A 390 000 B 420 000 C 440 000 D 470 000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2017

Q236 · Which action would increase a company’s current ratio? 9706/11 Oct/Nov 2017

19 Which action would increase a company’s current ratio? A paying rent in advance B receiving money from trade receivables C repaying a long-term loan D selling non-current assets

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2017

Q237 · Calculation of which ratio does not include revenue? 9706/12 Oct/Nov 2017

20 Calculation of which ratio does not include revenue? A gross margin B mark-up C non-current asset turnover D profit margin

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2017

Q238 · Bradshaw does not keep proper books of account 9706/12 Oct/Nov 2017

21 Bradshaw does not keep proper books of account. The following information is available for the year. cost of sales $750 000 mark-up 20% cash sales $300 000 trade receivables $46 000 What are total sales and trade receivables turnover? trade total sales receivables $ turnover (days) A 900 000 19 B 900 000 28 C 937 500 18 D 937 500 27

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2017

Q239 · The financial statements of a company showed the following 9706/12 Oct/Nov 2017

22 The financial statements of a company showed the following. $ current liabilities 15 000 non-current liabilities 40 000 ordinary shares 120 000 general reserve 10 000 retained earnings 46 000 interest paid 11 000 Profit for the year was $23 000. What was the return on capital employed? A 10.65% B 13.07% C 15.74% D 19.32%

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2017

Q240 · The opening inventory for a business was $60 000 9706/13 Oct/Nov 2017

18 The opening inventory for a business was $60 000. The closing inventory was $80 000. Inventory turnover for the year was 10 times. The gross margin was 30%. What were the sales for the year? A $300 000 B $700 000 C $720 000 D $1 000 000

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2017

Q241 · Which statement about the limitations of comparing accounting ratios between similar… 9706/13 Oct/Nov 2017

20 Which statement about the limitations of comparing accounting ratios between similar businesses and over time is correct? A The ratios are best used when the businesses trade in different markets. B The ratios are only useful when the businesses have different accounting policies. C The ratios never explain the cause of difference between the results of the two businesses. D The ratios always take into account seasonal factors.

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2017

Q242 · The following has been extracted from the financial statements of a business 9706/12 Feb/March 2018

16 The following has been extracted from the financial statements of a business. $ revenue 135 000 total capital employed 575 000 non-current assets 180 000 What is the non-current asset turnover? A 0.31 times B 0.75 times C 1.33 times D 3.19 times

1 marks

Answer: B

This question in 9706/12 Feb/March 2018

Q243 · The following has been extracted from the financial statements of a business 9706/11 May/June 2018

19 The following has been extracted from the financial statements of a business. statement of financial income statement $ $ position profit from operations 48 000 7% debenture 65 000 debenture interest (4 550) ordinary share capital 95 000 loss on disposal of non-current asset (3 250) share premium 7 500 profit for the year 40 200 retained earnings 35 000 What was the return on capital employed (ROCE)? A 19.9% B 23.7% C 29.2% D 34.9%

1 marks

Answer: B

This question in 9706/11 May/June 2018

Q244 · What would affect the current ratio of a business? 9706/11 May/June 2018

20 What would affect the current ratio of a business? A purchase of inventory by cash B purchase of new machinery by cheque C receipt of cash from a credit customer D revaluation of a non-current asset

1 marks

Answer: B

This question in 9706/11 May/June 2018

Q245 · The following is an extract from an income statement 9706/12 May/June 2018

18 The following is an extract from an income statement. $ revenue 180 000 costs of goods sold (75 000) distribution costs (8 000) administrative expenses (22 000) profit from operations 75 000 debenture interest (2 500) profit for the year 72 500 What was the operating expenses to revenue ratio? A 16.7% B 18.1% C 58.3% D 59.7%

1 marks

Answer: A

This question in 9706/12 May/June 2018

Q246 · The following information is available for the year ended 31 December 2017 9706/12 May/June 2018

19 The following information is available for the year ended 31 December 2017. $000 revenue 640 cost of sales 350 machinery at net book value 120 land and buildings at net book value 90 motor vehicles at net book value 20 current assets 50 equity 210 What was the non-current assets turnover? A 1.26 times B 2.29 times C 2.78 times D 3.05 times

1 marks

Answer: C

This question in 9706/12 May/June 2018

Q247 · A company raises finance by issuing debentures 9706/13 May/June 2018

17 A company raises finance by issuing debentures. What is the effect on net current assets and short-term profits? net current short-term assets profits A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: C

This question in 9706/13 May/June 2018

Q248 · Why would employees be interested in their employer’s financial statements? 9706/13 May/June 2018

18 Why would employees be interested in their employer’s financial statements? A to assess whether the business can continue to trade in the foreseeable future B to compare their salaries with the employees of competitors C to put a value on the goodwill of the business D to understand the impact of the business on the economy

1 marks

Answer: A

This question in 9706/13 May/June 2018

Q249 · A business has provided the following information 9706/13 May/June 2018

19 A business has provided the following information. costs of sales $240 000 gross margin 25% profit for the year $16 000 What was the expenses to revenue ratio to the nearest whole percent? A 15% B 18% C 20% D 27%

1 marks

Answer: C

This question in 9706/13 May/June 2018

Q250 · A company provided the following information 9706/11 Oct/Nov 2018

17 A company provided the following information. $ total assets 160 000 non-current assets 124 000 equity 92 000 non-current liabilities 45 000 What was the amount of working capital? A $13 000 B $23 000 C $79 000 D $115 000

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2018

Q251 · A business provides the following extract from its income statement 9706/11 Oct/Nov 2018

19 A business provides the following extract from its income statement. $ opening inventory 15 000 purchases 180 000 closing inventory (18 750) cost of sales 176 250 What is the rate of inventory turnover? A 9.4 times B 9.6 times C 10.4 times D 10.7 times

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2018

Q252 · Which actions would, in general, improve the liquid (acid test) ratio of a business in… 9706/11 Oct/Nov 2018

20 Which actions would, in general, improve the liquid (acid test) ratio of a business in the short term? 1 delaying trade payables 2 selling inventory 3 selling surplus non-current assets 4 trade receivables paying their debts A 1 and 4 B 2 and 3 C 3 only D 4 only

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2018

Q253 · Why is inventory excluded from the calculation of the quick ratio? 9706/11 Oct/Nov 2018

21 Why is inventory excluded from the calculation of the quick ratio? A Business can choose either FIFO and AVCO for inventory valuation. B Inventory can become obsolete easily. C Inventory is the slowest current asset to be converted into cash. D The value of inventory fluctuates.

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2018

Q254 · The financial data relates to two businesses 9706/12 Oct/Nov 2018

18 The financial data relates to two businesses. X Y trade receivable turnover (days) 90 40 trade payable turnover (days) 50 70 liquid (acid test) ratio 3 : 1 1 : 1 current ratio 4.5 : 1 6.2 : 1 Which statement about the comparison of the two businesses’ performance is correct? A X has better credit control system. B X has higher profitability. C Y has better credit control system. D Y has higher profitability.

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2018

Q255 · The following information is available for a business for the year 9706/13 Oct/Nov 2018

19 The following information is available for a business for the year. $ revenue 2 400 000 cost of sales 1 100 000 administration expenses 400 000 distribution costs 500 000 finance costs 25 000 profit for the year 375 000 What is the operating expenses to revenue ratio for the year? A 37.5% B 38.54% C 45.83% D 83.33%

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2018

Q256 · A company’s financial statements include the following 9706/13 Oct/Nov 2018

20 A company’s financial statements include the following. $ profit before interest 200 000 profit for the year 140 000 issued share capital 500 000 reserves 160 000 non-current liabilities 380 000 What is the return on capital employed? A 19.2% B 21.2% C 30.3% D 40.0%

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2018

Q257 · Which item would result in a decrease in the expenses to revenue ratio? 9706/12 Feb/March 2019

19 Which item would result in a decrease in the expenses to revenue ratio? A accrual for telephone B increase in provision for doubtful debts C prepayment for rent and rates D the return of goods sold

1 marks

Answer: C

This question in 9706/12 Feb/March 2019

Q258 · Which ratio calculates the average time a business takes to pay its credit suppliers? 9706/11 May/June 2019

18 Which ratio calculates the average time a business takes to pay its credit suppliers? A current ratio B liquid (acid test) ratio C trade payables turnover D trade receivables turnover

1 marks

Answer: C

This question in 9706/11 May/June 2019

Q259 · A business has prepared the following information for the year ended 30 April 2019 9706/11 May/June 2019

20 A business has prepared the following information for the year ended 30 April 2019. $ $ revenue 220 000 opening inventory 25 000 purchases 120 000 closing inventory (31 000) cost of goods sold 114 000 gross profit 106 000 What was the inventory turnover? A 86 days B 90 days C 95 days D 100 days

1 marks

Answer: B

This question in 9706/11 May/June 2019

Q260 · A trader wishes to set a selling price 9706/12 May/June 2019

18 A trader wishes to set a selling price. How does he use a mark-up? A by adding a percentage to the cost B by adding a percentage to the selling price C by deducting a percentage from the cost D by deducting a percentage from the selling price

1 marks

Answer: A

This question in 9706/12 May/June 2019

Q261 · Which accounting ratio could not be used to assess the ability of a business to pay its… 9706/13 May/June 2019

18 Which accounting ratio could not be used to assess the ability of a business to pay its trade payables? A current ratio B expenses to revenue ratio C liquid (acid test) ratio D trade receivables turnover

1 marks

Answer: B

This question in 9706/13 May/June 2019

Q262 · A sole trader has provided the following information 9706/13 May/June 2019

19 A sole trader has provided the following information. revenue for the year $240 000 average inventory $25 000 mark-up 50% What was the rate of inventory turnover? A 3.2 times B 4.8 times C 6.4 times D 9.6 times

1 marks

Answer: C

This question in 9706/13 May/June 2019

Q263 · A business provided the following information 9706/13 May/June 2019

20 A business provided the following information. gross margin 20% $ sales 275 325 opening inventory 25 450 closing inventory 55 975 What were the total purchases? A $189 735 B $220 260 C $250 785 D $259 963

1 marks

Answer: C

This question in 9706/13 May/June 2019

Q264 · A reduction in which item would improve a business’s profit margin? 9706/11 Oct/Nov 2019

18 A reduction in which item would improve a business’s profit margin? A depreciation charge B drawings C trade payables turnover (days) D trade receivables turnover (days)

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2019

Q265 · A company’s financial statements showed the following 9706/11 Oct/Nov 2019

19 A company’s financial statements showed the following. $000 revenue 250 cost of sales (60) distribution costs (45) administrative expenses (10) income from investments 5 finance costs (20) What is the operating expenses to revenue ratio? A 22% B 28% C 30% D 46%

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2019

Q266 · Which information would an investor gain by looking at the financial statements of a… 9706/12 Oct/Nov 2019

19 Which information would an investor gain by looking at the financial statements of a business? 1 identifying future trading prospects 2 identifying the amount of future dividends 3 identifying that the entity is a going concern A 1 and 2 B 1 only C 2 and 3 D 3 only

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2019

Q267 · A company provides the following information for the year ended 31 May 2019 9706/13 Oct/Nov 2019

19 A company provides the following information for the year ended 31 May 2019. $ total purchases 175 000 cash purchases 35 000 inventory 1 June 2018 12 000 inventory 31 May 2019 15 000 What is the rate of inventory turnover (rounded to the nearest whole number)? A 11 times B 12 times C 13 times D 16 times

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2019

Q268 · A business applied a mark-up of 25% 9706/12 Feb/March 2020

18 A business applied a mark-up of 25%. Which statement is correct? A Gross margin is 20%. B Gross margin is 25%. C Profit margin is 20%. D Profit margin is 25%.

1 marks

Answer: A

This question in 9706/12 Feb/March 2020

Q269 · A company’s results for a year showed credit sales of $500 000 9706/12 Feb/March 2020

19 A company’s results for a year showed credit sales of $500 000. The trade receivables collection period was 73 days. In the next year, credit sales were expected to be $550 000 and the collection period was not expected to change. What is the expected percentage change in trade receivables? A decrease of 10% B increase of 10% C decrease of 20% D increase of 20%

1 marks

Answer: B

This question in 9706/12 Feb/March 2020

Q270 · A business has the following current assets and current liabilities 9706/12 Feb/March 2020

20 A business has the following current assets and current liabilities. $ trade receivables 6000 bank overdraft 1500 cash in hand 50 trade payables 5050 The only other item in the working capital is inventory. The current ratio is 2 : 1. What is the value of the inventory? A $2550 B $4050 C $5550 D $7050

1 marks

Answer: D

This question in 9706/12 Feb/March 2020

Q271 · The rate of inventory turnover of a company has been calculated for two successive periods 9706/12 May/June 2020

18 The rate of inventory turnover of a company has been calculated for two successive periods. current period 5.6 times previous period 4.8 times The following statements have been made about the change. 1 Inventory is moving more slowly in the current period. 2 Inventory is moving more quickly in the current period. 3 Management of inventory has been more efficient in the current period. Which statements may explain the change? A 1 and 3 B 1 only C 2 and 3 D 2 only

1 marks

Answer: C

This question in 9706/12 May/June 2020

Q272 · The following items appear on a statement of financial position 9706/12 May/June 2020

19 The following items appear on a statement of financial position. $ inventory 20 000 cash and cash equivalents 3 500 trade payables 11 000 provision for doubtful debts 500 The current ratio is 3 : 1. How much do the trade receivables owe? A $9500 B $10 000 C $12 000 D $12 500

1 marks

Answer: B

This question in 9706/12 May/June 2020

Q273 · A trader has a current ratio of 2 : 1 9706/11 Oct/Nov 2020

18 A trader has a current ratio of 2 : 1. Which event would cause this ratio to increase? A buying goods for resale on credit B buying new machinery on credit C converting an overdraft to a long-term loan D credit customers paying their account

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2020

Q274 · A company buys and sells all of its inventory on a credit basis 9706/11 Oct/Nov 2020

19 A company buys and sells all of its inventory on a credit basis. The following information is available. $ purchases 450 000 sales 500 000 trade payables 80 000 trade receivables 120 000 Which period of credit was taken by customers? A 59 days B 65 days C 88 days D 98 days

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2020

Q275 · A company purchases a product that costs $120 9706/11 Oct/Nov 2020

20 A company purchases a product that costs $120. The company expects to make a gross margin of one-third. What is the company’s mark-up? A $40 B $60 C $160 D $180

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2020

Q276 · The following information is available 9706/12 Oct/Nov 2020

19 The following information is available. $ $ revenue 600 000 opening inventory 46 000 purchases 244 000 290 000 closing inventory 50 000 240 000 gross profit 360 000 expenses 150 000 profit from operations 210 000 What was the rate of inventory turnover (in times)? A 4.8 B 5 C 12 D 12.5

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2020

Q277 · At the end of his first year of trading, the trader lost all of his inventory in a fire 9706/12 Feb/March 2021

12 At the end of his first year of trading, the trader lost all of his inventory in a fire. He knows the values of sales and purchases and wishes to calculate the value of the inventory lost. Which ratio should he use? A gross margin B profit margin C trade payables turnover D trade receivables turnover

1 marks

Answer: A

This question in 9706/12 Feb/March 2021

Q278 · The trade receivables turnover ratio figures for two companies are shown 9706/12 May/June 2021

18 The trade receivables turnover ratio figures for two companies are shown. company turnover in days X 45 Y 55 What does this indicate about company Y? A It has higher levels of trade receivables than X. B It has higher liquidity than X. C It is less efficient in managing its receivables than X. D It offers less credit to its customers than X. $ 2 20 0 0

1 marks

Answer: C

This question in 9706/12 May/June 2021

Q279 · A trader has been making a provision for irrecoverable debts for some years 9706/13 May/June 2021

19 A trader has been making a provision for irrecoverable debts for some years. He is now considering reducing the percentage rate of the provision. Which ratios would be affected by this reduction? 1 current ratio 2 gross margin 3 profit margin A 1 and 2 B 1 and 3 C 2 and 3 D 3 only

1 marks

Answer: B

This question in 9706/13 May/June 2021

Q280 · The following information is available for a business for the year ended 31 December 2020 9706/13 May/June 2021

20 The following information is available for a business for the year ended 31 December 2020. rate of inventory turnover 20 times opening inventory $40 000 closing inventory $20 000 gross margin 25% What was the revenue for the year ended 31 December 2020? A $750 000 B $800 000 C $900 000 D $1 000 000

1 marks

Answer: B

This question in 9706/13 May/June 2021

Q281 · What are limitations of using accounting ratios for comparisons between firms in the same… 9706/11 Oct/Nov 2021

18 What are limitations of using accounting ratios for comparisons between firms in the same industry? 1 Different businesses may have different accounting policies. 2 Efficiencies of different businesses cannot be compared. 3 Liquidity of the businesses cannot be assessed. A 1 and 2 B 1 only C 2 and 3 D 3 only

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2021

Q282 · Abdul is assessing the profitability and efficiency of his business and is using these… 9706/11 Oct/Nov 2021

19 Abdul is assessing the profitability and efficiency of his business and is using these figures from the financial statements. $ non-current assets at cost 70 000 net book value of assets 53 000 revenue 340 000 profit from operations 84 000 What is the non-current asset turnover? A 1.20 times B 1.58 times C 4.86 times D 6.42 times

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2021

Q283 · The following information was available for a business for the year ended 31 December 9706/11 Oct/Nov 2021

20 The following information was available for a business for the year ended 31 December. annual sales $400 000 gross margin 20% rate of inventory turnover 4 times opening inventory $60 000 What was the value of closing inventory? A $70 000 B $80 000 C $100 000 D $140 000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2021

Q284 · A trader’s income statement recorded sales, $10 000, and cost of sales, $7070 9706/12 Oct/Nov 2021

11 A trader’s income statement recorded sales, $10 000, and cost of sales, $7070. The trader had taken goods for his own use during the year, cost $280, selling price $410, but had omitted to record this. What effect did the omission have on the gross margin? A 2.8% overstated B 2.8% understated C 4.1% overstated D 4.1% understated

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2021

Q285 · The following information is available 9706/13 Oct/Nov 2021

19 The following information is available. sales $250 000 purchases $120 000 average inventory $20 000 mark-up 25% What is the rate of inventory turnover? A 6.0 times B 9.4 times C 10.0 times D 12.5 times

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2021

Q286 · The trade receivables turnover of a business has been calculated for two years 9706/13 Oct/Nov 2021

20 The trade receivables turnover of a business has been calculated for two years. turnover in days this year 60 last year 50 What is a possible reason for the change? A increased levels of discounts received B increased profit margins C increased cash sales volume D customer liquidity problems

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2021

Q287 · The following information is available for a business 9706/12 May/June 2022

20 The following information is available for a business. sales revenue $500 000 purchases $365 000 gross margin 25% mark-up 33 % 1 3 inventory at start of the period $20 000 What was the value of closing inventory? A $10 000 B $20 000 C $30 000 D $50 000

1 marks

Answer: A

This question in 9706/12 May/June 2022

Q288 · The following shows extracts from the statement of financial position of a company 9706/12 May/June 2022

21 The following shows extracts from the statement of financial position of a company. at 30 September $ non-current assets 120 000 inventory 35 000 trade receivables 23 000 cash at bank (debit balance) 12 000 trade payables 15 000 bank loan repayable within 12 months 40 000 What is the liquid (acid test) ratio? A 0.64 : 1 B 1.27 : 1 C 2.33 : 1 D 4.67 : 1

1 marks

Answer: A

This question in 9706/12 May/June 2022

Q289 · What would increase the current ratio of a business? 9706/13 May/June 2022

20 What would increase the current ratio of a business? A buying goods on credit for $2000 and selling immediately for $3000 cash B paying wages of $1000 in cash C purchasing a non-current asset of $10 000 on credit D selling goods of $1000 at cost price on credit

1 marks

Answer: A

This question in 9706/13 May/June 2022

Q290 · The following information is available for a business 9706/13 May/June 2022

21 The following information is available for a business. $ sales 36 000 purchases 21 000 inventory at 1 January 2021 3 500 inventory at 31 January 2021 2 800 What is the rate of inventory turnover for January? A 6.67 times B 6.89 times C 7.75 times D 11.43 times

1 marks

Answer: B

This question in 9706/13 May/June 2022

Q291 · What does return on capital employed measure for a business? 9706/11 Oct/Nov 2022

20 What does return on capital employed measure for a business? A efficiency to generate profit from its total assets B efficiency to generate profit from its total liabilities C efficiency to generate profit from its non-current assets D efficiency to generate profit from its shareholders’ equity and non-current liabilities

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2022

Q292 · The following information was available for a business at the end of a financial year 9706/11 Oct/Nov 2022

21 The following information was available for a business at the end of a financial year. $ sales 300 000 opening inventory 33 000 closing inventory 27 000 The business applies a mark-up of 20% on all goods purchased. What was the inventory turnover in days? A 40 B 44 C 45 D 46

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2022

Q293 · A business buys goods for resale, paying by cheque rather than buying on credit 9706/13 Oct/Nov 2022

20 A business buys goods for resale, paying by cheque rather than buying on credit. What effect will this have on the current ratio and the liquid (acid test) ratio? current ratio liquid (acid test) ratio A decrease decrease B increase decrease C no change decrease D no change increase

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2022

Q294 · The following information is available 9706/13 Oct/Nov 2022

21 The following information is available. $ non-current assets at cost at 31 December 2021 400 000 provision for depreciation at 31 December 2021 280 000 sales revenue for the year 2021 980 000 cost of sales for the year 2021 410 000 What is the non-current asset turnover in times? A 1.03 B 2.45 C 3.42 D 8.17

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2022

Q295 · A business has a rate of inventory turnover of 17 times 9706/12 Feb/March 2023

20 A business has a rate of inventory turnover of 17 times. What is the numerator in the calculation? A average inventory B closing inventory C cost of sales D credit sales

1 marks

Answer: C

This question in 9706/12 Feb/March 2023

Q296 · The year-end statement of financial position of X Limited at 31 December shows the… 9706/12 Feb/March 2023

21 The year-end statement of financial position of X Limited at 31 December shows the following: $000 non-current assets 1350 current assets 140 ordinary share capital 900 general reserve 150 long-term loan 200 current liabilities 90 retained earnings 150 The profit from operations for the year was $65 000 and finance costs were $20 000. What was the return on capital employed for the year? A 3.21% B 4.64% C 5.7% D 5.91%

1 marks

Answer: B

This question in 9706/12 Feb/March 2023

Q297 · Which statements describe the usefulness of cost–volume–profit analysis? 9706/12 Feb/March 2023

30 Which statements describe the usefulness of cost–volume–profit analysis? 1 to see the relationship between costs and revenue at different levels of activity 2 to set the selling price of a product to achieve targeted profit 3 to set the selling prices for a variety of products A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: B

This question in 9706/12 Feb/March 2023

Q298 · Gordon sells goods on credit to Sybil 9706/11 May/June 2023

19 Gordon sells goods on credit to Sybil. Which information from Sybil’s financial statements is of greatest interest to Gordon? A current ratio B gross profit margin C mark-up D return on capital employed

1 marks

Answer: A

This question in 9706/11 May/June 2023

Q299 · Which actions would, in general, improve the acid test ratio of a business in the short… 9706/11 May/June 2023

20 Which actions would, in general, improve the acid test ratio of a business in the short term? 1 delaying trade payables 2 selling inventory 3 selling surplus non-current assets 4 trade receivables paying their debts A 1 and 4 B 2 and 3 C 3 only D 4 only

1 marks

Answer: B

This question in 9706/11 May/June 2023

Q300 · A business had current liabilities of $4000 at its year end 9706/11 May/June 2023

21 A business had current liabilities of $4000 at its year end. The acid test ratio was 1.5 : 1. The current ratio was 2.25 : 1. What was the value of inventory held at the year end? A $3000 B $4000 C $9000 D $15 000

1 marks

Answer: A

This question in 9706/11 May/June 2023

Q301 · The following information is available for a company for its year ended 31 December 9706/11 May/June 2023

22 The following information is available for a company for its year ended 31 December. $ non-current assets 472 000 current assets 60 000 current liabilities 45 000 interest paid 12 000 profit from operations 84 000 share capital 200 000 total reserves including the profit for the year 157 000 non-current liabilities 130 000 What is the return on capital employed? A 14.78% B 17.25% C 20.17% D 23.53%

1 marks

Answer: B

This question in 9706/11 May/June 2023

Q302 · Which three key users of financial statements will be most interested in the statement of… 9706/12 May/June 2023

19 Which three key users of financial statements will be most interested in the statement of profit or loss? A employees, environmental bodies, government B public, environmental bodies, suppliers C public, suppliers, potential investors D shareholders, government, potential investors

1 marks

Answer: D

This question in 9706/12 May/June 2023

Q303 · Raj, a supplier of goods, has calculated the following ratios from the financial… 9706/12 May/June 2023

20 Raj, a supplier of goods, has calculated the following ratios from the financial statements of a possible new customer. 1 current ratio 2 non-current asset turnover 3 trade payables turnover 4 trade receivables turnover Which ratios would help Raj decide whether or not to supply goods? A 1 and 2 B 1 and 3 C 2 and 3 D 3 and 4

1 marks

Answer: B

This question in 9706/12 May/June 2023

Q304 · The following information is available for a business for the year ended 31 December 9706/12 May/June 2023

21 The following information is available for a business for the year ended 31 December. $000 revenue 800 purchases 600 owing to credit suppliers 46 owed by credit customers 58 90% of revenue is from credit sales. 80% of purchases are on credit terms. What is the trade payables turnover? A 23 days B 28 days C 35 days D 45 days

1 marks

Answer: C

This question in 9706/12 May/June 2023

Q305 · The table shows information from a company’s financial statements 9706/12 May/June 2023

22 The table shows information from a company’s financial statements. $000 revenue 135 gross profit 34 profit from operations 11 profit for the year 8 non-current assets 59 current assets 50 non-current liabilities 12 current liabilities 40 What is the return on capital employed? A 8.1% B 11.3% C 14.0% D 15.9%

1 marks

Answer: D

This question in 9706/12 May/June 2023

Q306 · Which stakeholders use the financial statements to assess whether a company is a… 9706/13 May/June 2023

19 Which stakeholders use the financial statements to assess whether a company is a reasonable credit risk? A customers B employees C government D suppliers

1 marks

Answer: D

This question in 9706/13 May/June 2023

Q307 · Which statements describe the limitations of accounting information? 9706/13 May/June 2023

20 Which statements describe the limitations of accounting information? 1 Businesses in the same industry may use different accounting policies. 2 Non-monetary aspects of a business are excluded from financial statements. 3 Results of accounting ratios are based on the use of historic cost. A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: A

This question in 9706/13 May/June 2023

Q308 · A company provided the following information at the end of its first year of trading 9706/13 May/June 2023

21 A company provided the following information at the end of its first year of trading. $ cash sales 9 000 credit sales 27 000 receipts from credit customers 24 000 trade receivables at year end 4 100 What was the trade receivables turnover? A 42 days B 46 days C 56 days D 63 days

1 marks

Answer: C

This question in 9706/13 May/June 2023

Q309 · A company’s profit from operations during a year was $128 000 9706/13 May/June 2023

22 A company’s profit from operations during a year was $128 000. Interest payable was $8000. The following amounts were included in the company’s statement of financial position at the year end. $ non-current assets 485 000 net current assets 27 000 non-current liabilities 80 000 What was the return on capital employed? A 20.3% B 21.6% C 23.4% D 25.0%

1 marks

Answer: D

This question in 9706/13 May/June 2023

Q310 · Why would employees be interested in their employer’s financial statements? 9706/11 Oct/Nov 2023

19 Why would employees be interested in their employer’s financial statements? A to assess whether the business can continue to trade in the foreseeable future B to compare their salaries with the employees of competitors C to put a value on the reputation of the business D to understand the impact of the business on the economy

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2023

Q311 · A business received a five-year loan of $40 000 9706/11 Oct/Nov 2023

20 A business received a five-year loan of $40 000. The loan was paid into the bank current account. What was the effect of the loan? return on current ratio capital employed A decreased decreased B decreased increased C increased decreased D increased increased

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2023

Q312 · The draft financial statements of a business for the year ended 30 June included the… 9706/11 Oct/Nov 2023

21 The draft financial statements of a business for the year ended 30 June included the following: $ revenue 280 000 gross profit 60 000 It was subsequently discovered that the closing inventory was understated by $10 000. What was the gross profit margin after correcting this error? A 17.9% B 20.7% C 21.4% D 25.0%

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2023

Q313 · The following information is available for a company 9706/11 Oct/Nov 2023

22 The following information is available for a company. sales revenue for the year $1 600 000 debenture interest paid $60 000 gross profit margin 20% operating expenses to revenue ratio 12% return on capital employed 16% What is the company’s capital employed? A $256 000 B $425 000 C $800 000 D $2 000 000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2023

Q314 · A company has calculated inventory turnover periods for two successive years 9706/12 Oct/Nov 2023

21 A company has calculated inventory turnover periods for two successive years. inventory year turnover in days 1 90 2 120 Company directors have suggested the following reasons for the change. 1 Purchases have decreased. 2 Purchases have increased. 3 Sales have decreased. 4 Sales have increased. What are the possible reasons for the change? A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2023

Q315 · The following information is available for a business at the end of its financial year 9706/12 Oct/Nov 2023

22 The following information is available for a business at the end of its financial year. $ credit purchases 140 000 credit sales 220 000 total purchases 160 000 total sales 250 000 trade payables 15 000 trade receivables 16 000 What is the trade receivables turnover? A 24 days B 27 days C 35 days D 40 days

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2023

Q316 · Which statement reflects how cost–volume–profit (CVP) analysis can help with management… 9706/12 Oct/Nov 2023

30 Which statement reflects how cost–volume–profit (CVP) analysis can help with management decision-making? A separating out fixed and variable elements of cost B setting short-term prices C understanding changes in the business environment D understanding changes in the product mix

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2023

Q317 · Which is an internal stakeholder? 9706/13 Oct/Nov 2023

20 Which is an internal stakeholder? A bank B debenture holder C employee D potential investor

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2023

Q318 · In the last financial year, R Limited had sales revenue of $190 000 and operating… 9706/13 Oct/Nov 2023

21 In the last financial year, R Limited had sales revenue of $190 000 and operating expenses of $108 000. In the current financial year, the directors think that if they increase spending on advertising by $5000, then sales would increase to $205 000. Operating expenses (excluding advertising) would increase by $7000. What would the operating expenses to revenue ratio be if the additional advertising took place? A 56.10% B 58.54% C 158.33% D 170.83%

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2023

Q319 · The following information is available for a business 9706/13 Oct/Nov 2023

22 The following information is available for a business. $ total purchases 820 000 credit purchases 740 000 opening inventory 60 000 closing inventory 80 000 total sales (all on credit) 910 000 carriage inwards 20 000 returns outwards 40 000 What was the inventory turnover? A 29 days B 32 days C 33 days D 35 days

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2023

Q320 · Jim is a manager in a limited company 9706/12 Feb/March 2024

20 Jim is a manager in a limited company. He also owns a few of its shares. Why has he been looking at its most recent financial statements? A to discover the profit made by his department as he might receive a bonus B to find out if the company made a profit, making his job more secure C to know if dividends will increase over the next five years, improving his income D to see if the company has a good reputation, increasing the value of his shares

1 marks

Answer: B

This question in 9706/12 Feb/March 2024

Q321 · H Limited’s cost of sales for the recent two years (Year 2 and Year 1) is as follows… 9706/12 Feb/March 2024

21 H Limited’s cost of sales for the recent two years (Year 2 and Year 1) is as follows: Year 2 Year 1 $ $ average inventory 100 000 65 000 credit purchases 910 000 760 000 cost of sales 850 000 750 000 Which statement regarding the efficiency of inventory turnover is correct? A Year 2 is better because the average inventory is higher. B Year 2 is better because the inventory turnover (in days) is higher. C Year 2 is worse because the cost of sales is higher. D Year 2 is worse because the inventory turnover (in days) is higher.

1 marks

Answer: D

This question in 9706/12 Feb/March 2024

Q322 · A business provided the information shown for a period 9706/11 May/June 2024

19 A business provided the information shown for a period. $ sales revenue 1 500 000 purchases 1 000 000 inventory at end of the period 50 000 The rate of inventory turnover for the period was 12 times and the business attained a gross profit margin of 40%. The business also made some purchases returns and incurred an amount for carriage inwards. What was the value of inventory at the beginning of the period? A $100 000 B $116 667 C $128 572 D $200 000

1 marks

Answer: A

This question in 9706/11 May/June 2024

Q323 · When comparing with the previous year, a trader finds that his gross profit margin has… 9706/11 May/June 2024

20 When comparing with the previous year, a trader finds that his gross profit margin has increased and his trade receivables turnover has decreased. Which statement would explain this? A He bought in bulk and passed the savings on to his customers who bought more. B He offered more trade discount and more customers paid in cash. C He raised his selling price and offered more cash discounts. D He reduced his selling price to increase the total value of sales.

1 marks

Answer: C

This question in 9706/11 May/June 2024

Q324 · B Limited had credit sales for the year of $3 285 000 and trade receivables at year end… 9706/11 May/June 2024

21 B Limited had credit sales for the year of $3 285 000 and trade receivables at year end of $405 000. The sales director believed that if cash discounts had been given, then trade receivables would have been $351 000. The allowance for irrecoverable debts would have been reduced by $9000. What difference would the discounts have made to the trade receivables turnover? A It would have been 5 days faster. B It would have been 5 days slower. C It would have been 6 days faster. D It would have been 6 days slower.

1 marks

Answer: C

This question in 9706/11 May/June 2024

Q325 · Who are internal users of accounting information? 9706/13 May/June 2024

20 Who are internal users of accounting information? A customers B directors C potential investors D providers of finance

1 marks

Answer: B

This question in 9706/13 May/June 2024

Q326 · Which actions will make the acid test ratio worse? 9706/13 May/June 2024

21 Which actions will make the acid test ratio worse? 1 owner taking goods for own use 2 paying trade payables 3 purchasing a non-current asset by cheque 4 repaying a non-current liability A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

1 marks

Answer: D

This question in 9706/13 May/June 2024

Q327 · A business provided the following information relating to its most recent financial period 9706/13 May/June 2024

22 A business provided the following information relating to its most recent financial period. $ sales revenue 1 020 000 purchases 700 000 carriage inwards 80 000 carriage outwards 180 000 opening inventory 170 000 closing inventory 210 000 What is the rate of inventory turnover (times) for the period? A 3.47 B 3.89 C 4.84 D 5.37

1 marks

Answer: B

This question in 9706/13 May/June 2024

Q328 · Marcus bought a non-current asset 9706/11 Oct/Nov 2024

2 Marcus bought a non-current asset. Instead of paying in full he decided to pay in instalments over the next six months. What was the effect of his decision during the next six months? A bank overdraft was lower B current ratio was higher C liquidity was worse D non-current liabilities were greater

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2024

Q329 · Which statement is a limitation of accounting ratios? 9706/11 Oct/Nov 2024

20 Which statement is a limitation of accounting ratios? A they do not aid comparison with the business’s past performance B they do not help with future decision making C they do not help with inter-firm comparisons D they do not take account of qualitative factors

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2024

Q330 · A business provided the following information at the end of a financial period 9706/11 Oct/Nov 2024

21 A business provided the following information at the end of a financial period. $ total purchases for the period 700000 cash purchases during the period 200000 trade payables at the start of the period 80000 trade payables at the end of the period 60000 What is the trade payables turnover in days? A 32 B 37 C 44 D 52

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2024

Q331 · Which ratio measures the efficiency of a business? 9706/12 Oct/Nov 2024

20 Which ratio measures the efficiency of a business? A acid test B mark-up C non-current asset turnover D return on capital employed

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2024

Q332 · A sole trader’s cost of sales is $240 000 9706/12 Oct/Nov 2024

22 A sole trader’s cost of sales is $240 000. The gross profit margin is 20%. What are the sales for the year? A $280000 B $288000 C $300000 D $320000

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2024

Q333 · The draft financial statements of a business showed values for trade receivables… 9706/13 Oct/Nov 2024

21 The draft financial statements of a business showed values for trade receivables, inventory, trade payables and bank overdraft. Which events would cause the acid test ratio to decrease? 1 recording a payment to a trade payable 2 creating an allowance for irrecoverable debts 3 writing off some obsolete inventory A 1 and 2 B 2 and 3 C 2 only D 3 only

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2024

Q334 · The following information is available about Chi’s business 9706/13 Oct/Nov 2024

22 The following information is available about Chi’s business. $ opening inventory 18000 closing inventory 26000 cost of sales 442000 When calculating his rate of inventory turnover, Chi used closing inventory in error. What was the effect of this error on the rate of inventory turnover? A 3.09 times too high B 3.09 times too low C 7.55 times too high D 7.55 times too low

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2024

Q335 · Which statements about ratios are correct? 9706/11 May/June 2025

21 Which statements about ratios are correct? 1 Ratios are affected by accounting policies. 2 Ratios can be compared with industry averages. 3 Ratios generally ignore inflation. 4 Ratios include non-monetary items. A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

1 marks

Answer: A

This question in 9706/11 May/June 2025

Q336 · A company had the following balances at 31 December 9706/12 May/June 2025

21 A company had the following balances at 31 December. $ inventory 31000 trade receivables 88000 allowance for irrecoverable debts 2000 bank overdraft 9000 cash in hand 5000 The current ratio is 2.5:1. What was the value of trade payables at 31 December? A $38600 B $39800 C $40600 D $57800

1 marks

Answer: B

This question in 9706/12 May/June 2025

Q337 · Which statements about ratios are correct? 9706/13 May/June 2025

21 Which statements about ratios are correct? 1 Ratios are affected by accounting policies. 2 Ratios can be compared with industry averages. 3 Ratios generally ignore inflation. 4 Ratios include non-monetary items. A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

1 marks

Answer: A

This question in 9706/13 May/June 2025

Q338 · Which stakeholders would focus mainly on the liquidity of a business? 9706/11 Oct/Nov 2025

20 Which stakeholders would focus mainly on the liquidity of a business? 1 government 2 lenders 3 public and environmental bodies 4 suppliers A 1 and 2 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2025

Q339 · A company’s financial statements show the following information 9706/11 Oct/Nov 2025

21 A company’s financial statements show the following information. $ profit from operations 125000 profit for the year 116000 shareholders’ equity 423000 long-term loan 80000 current liabilities 45000 What is the return on capital employed? A 21.17% B 22.81% C 23.06% D 24.85%

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2025

Q340 · The owner of a business has provided the following information 9706/11 Oct/Nov 2025

22 The owner of a business has provided the following information. average inventory $15000 rate of inventory turnover 8 times mark-up 25% What is the business’s revenue? A $144000 B $150000 C $160000 D $210000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2025

Q341 · Who are the internal users of financial information? 9706/12 Oct/Nov 2025

19 Who are the internal users of financial information? 1 bank 2 directors 3 employees 4 potential investors A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2025

Q342 · A trader calculates his trade receivables turnover as 89 days 9706/12 Oct/Nov 2025

20 A trader calculates his trade receivables turnover as 89 days. What was the denominator (bottom figure) in his calculation? A credit purchases B credit sales C trade payables D trade receivables

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2025

Q343 · The following details have been extracted from the financial statements of a limited… 9706/12 Oct/Nov 2025

21 The following details have been extracted from the financial statements of a limited company. statement of profit or loss for the year $ profit from operations 59800 finance costs 12000 profit for the year 47800 statement of financial position at the year end $ equity ordinary share capital 700000 retained earnings 72500 total equity 772500 non-current liabilities 10% debentures 120000 What was the return on capital employed? A 5.36% B 6.19% C 6.70% D 7.74%

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2025

Q344 · A trader calculates his rate of inventory turnover as eight times a year 9706/13 Oct/Nov 2025

22 A trader calculates his rate of inventory turnover as eight times a year. What was the numerator (top figure) in his calculation? A average inventory B closing inventory C cost of sales D credit purchases

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2025