IGCSE Ratios

How is the collection period for Trade Receivables calculated?

• credit sales / Trade Receivables x 100

• credit sales / Trade Receivables x 365

• Trade Receivables / credit sales x 100

• Trade Receivables / credit sales x 365

The table shows the performance of two businesses, X and Y, in a financial year.

What is revealed by comparing the ratios for X and Y?

• X controls its overhead expenses better than Y.

• Y controls its overhead expenses better than X.

• X’s cost of sales is higher than Y’s.

• Y’s cost of sales is higher than X’s.

Which is the best indicator of the liquidity of a business?

• current ratio

• quick ratio

• return on capital employed

• working capital

Which is a measure of profitability?

• current ratio

• quick ratio

• rate of inventory turnover

• return on capital employed

A trader sets his selling price by adding a profit figure on to the cost price.

How does he do this?

• by applying margin

• by applying margin

• by applying margin

• by using the quick ratio

What is shown by the percentage of profit to revenue?

• whether the cost of sales has decreased

• whether the expenses are well controlled

• whether the selling price has increased

• whether the inventory is being sold quickly enough

A trader’s quick (acid-test) ratio was 0.8 : 1.

What does this mean?

• Current assets excluding inventory were less than current liabilities.

• Current assets excluding inventory were more than current liabilities.

• Current assets were less than current liabilities.

• Current assets were more than current liabilities.

Two businesses, X and Y, are of a similar size and are in the same industry.

They provide the following information.

What does this show?

• X controlled expenses better than Y.

• Y controlled expenses better than X.

• X’s sales were greater than Y’s.

• Y’s sales were greater than X’s.

What is used in the calculation of the trade payables payment period?

• average inventory

• credit purchases

• credit sales

• total purchases

Four businesses are of a similar size and sell similar products.

Which business is most efficient at keeping its overhead expenses to a minimum?

• Gross profit / revenue 40%

  profit for the year / revenue 23%

• Gross profit / revenue 45%

  profit for the year / revenue 30%

• Gross profit / revenue 55%

  profit for the year / revenue 37%

• Gross profit / revenue 65%

  profit for the year / revenue 45%