IGCSE Cambridge (CIE) Accounting 18 mins 18 questions

Multiple Choice Questions

Accounting Ratios
Profitability Ratios / Liquidity Ratios / Efficiency Ratios / Inter-firm Comparison /
Interested Parties / Limitations of Accounting Statements

Easy (4 questions) /4 Scan here to return to the course

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Medium (9 questions) /9

Hard (5 questions) /5

Total Marks /18

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Easy Questions
1 A trader provides the following information.

opening inventory 9 000

purchases 121 000

closing inventory 15 000

What was the rate of inventory turnover?

A. 4.79
B. 5.42
C. 9.58
D. 10.83
(1 mark)

2 Ben is the sales manager at a display lot for garden sheds. He is paid based on the
number of sheds sold.

Which accounting ratio will be relevant to Ben?

A. gross margin
B. profit margin
C. rate of inventory turnover
D. trade receivables turnover
(1 mark)

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3 Which one of the following is not a limitation of inter-firm comparison?

A. Accounting records do not contain information about the skills of the workforce
B. Businesses may have been operating for different amounts of time
C. Businesses may set different sales prices for the goods they sell
D. The financial periods may be different for different businesses
(1 mark)

4 Aalim is considering selling goods to another business on credit.

Why would he be interested in the financial statements of that other business?

A. to know if the business would be able to pay what it owed

B. to know the amount owed by the business in trade receivables
C. to know the business's profit for the year
D. to know the value of the business's inventory
(1 mark)

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Medium Questions
1 A number of potential investors are considering purchasing shares in a limited company.

What information would be of interest to these potential investors?

1 the price of the shares

2 the expected future profits of the company

3 the expected rate of dividend the company might pay

4 when the company will pay back any money invested

A. 1, 2 and 3
B. 1, 2 and 4
C. 1 and 3 only
D. 2 and 3 only
(1 mark)

2 The following is the list of balances for a company at 31 August 2024.

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 $

cash in hand 375

bank loan - repayable 30 November 2024 2 500

bank loan - repayable 31 January 2026 4 000

bank overdraft 250

trade receivables 9 200

trade payables 5 800

other receivables 300

other payables 105

inventory 21 000

What was the current ratio?

A. 1.14 : 1
B. 2.44 : 1
C. 3.57 : 1
D. 5.02 : 1
(1 mark)

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3 A trader notices that her gross margin this year has decreased when compared with the
gross margin last year.

Which of the following could be a reason for this?

A. Administrative expenses have increased compared with last year.

B. A greater rate of cash discount has been allowed compared with last year.
C. A greater rate of trade discount has been allowed compared with last year.
D. Depreciation of equipment has increased compared with last year.
(1 mark)

4 Which of the following changes might a business make in order to reduce its liquid (acid
test) ratio?

A. Reduce bank overdraft

B. Reduce inventory
C. Reduce other payables
D. Reduce trade receivables
(1 mark)

5 The following table contains accounting ratios relating to the businesses owned by
Awinita and Tokala.

Awinita Tokala

liquid (acid test) ratio 1.2 : 1 0.9 : 1

current ratio 2.1 : 1 2.5 : 1

Which of the following statements are correct?

1 Awinita has insufficient current assets to meet her current liabilities.

2 Awinita can meet her current liabilities from her liquid assets more easily than Tokala.

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 3 Tokala has sufficient liquid assets to meet his current liabilities.

4 Tokala can meet his current liabilities from his current assets more easily than
Awinita.

A. 1 and 2
B. 2 and 3
C. 2 and 4
D. 3 and 4
(1 mark)

6 Arvan took out a long-term bank loan and used some of the funds to to pay some of his
credit suppliers early.

How did this affect his business's return on capital employed (ROCE) and trade payables
turnover (days)?

return on capital employed (ROCE) trade payables turnover (days)

A decrease decrease

B decrease increase

C increase decrease

D increase increase

(1 mark)

7 Madison provided the following information about her trading business.

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 $

for the year ended 31 October 2024

revenue: cash sales 191 000

revenue: credit sales 267 000

at 31 October 2024

trade receivables 20 480

other receivables 3 200

What was Madison's trade receivables turnover?

A. 17 days
B. 19 days
C. 28 days
D. 33 days
(1 mark)

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8 Hypatia owns and operates a bookshop. Which actions could she take to improve her
rate of inventory turnover?

1. increase the selling price of all her books

2. offer discounts on books over a year old

3. pay her book suppliers as quickly as possible

A. 1, 2 and 3
B. 1 and 3 only
C. 2 only
D. 3 only
(1 mark)

9 A trader provided the following information for the year ended 31 December.

total cash and credit purchases of goods for resale 240 000

cash purchases of goods for resale 23 000

credit purchases of non-current assets 35 000

Her trade payables at that date were $16 000.

What was the trade payables turnover?

A. 22 days
B. 25 days
C. 27 days
D. 29 days

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 (1 mark)

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Hard Questions
1 Aryana, a sole trader, provides the following information for her business.

credit sales $48 000

cash sales 20% of total sales

net profit margin 25%

How much is the net profit?

A. $9 600
B. $12 000
C. $14 400
D. $15 000
(1 mark)

2 A business provides the following information.

liquid (acid test) ratio 2.2 : 1

current liabilities $15 000

inventory $8 000

What is the value of the current assets?

A. $17 600

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 B. $25 000
C. $33 000
D. $41 000
(1 mark)

3 The table shows the gross margin and profit margin for businesses owned by four
different people.

Owner gross margin profit margin

% %

Aiyana 39 18

Bidziil 36 17

Chayton 34 16

Doli 31 11

Which owner's business controls its overheads most efficiently?

A. Aiyana's
B. Bidziil's
C. Chayton's
D. Doli's
(1 mark)

4 The following information is for the company WWL Limited.

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 $

net profit before interest 43 100

profit for the year 41 000

equity at the year-end 210 000

6% debentures 35 000

What was WWL Limited's return on capital employed?

A. 16.73%
B. 17.59%
C. 19.52%
D. 20.52%
(1 mark)

5 Yakub made credit sales of $120 450 in each of the years 2022 and 2023.

In 2023, his trade receivables turnover was exactly three days longer than it had been in
2022.

What was the change in his total trade receivables in 2023?

A. $110 decrease
B. $110 increase
C. $990 decrease
D. $990 increase
(1 mark)

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