What is ratio analysis?

• A mathematical approach to investigating accounts by comparing two unrelated figures

• A mathematical approach to investigating accounts by comparing two related figures

• A statistical method for predicting future financial performance

• A qualitative assessment of a company's financial statements

Which statements can ratio analysis be applied to for assessing the financial health of a business?

• The statement of financial position and the statement of cash flows

• The statement of comprehensive income and the statement of changes in equity

• The statement of financial position and the statement of comprehensive income

• The balance sheet and the income statement

What are the two types of ratios examined in the IGCSE?

• Profitability ratios and efficiency ratios

• Liquidity ratios and solvency ratios

• Profitability ratios and liquidity ratios

• Activity ratios and leverage ratios

What does the gross profit margin indicate?

• The total revenue generated by a business

• The net profit after deducting all expenses

• The percentage of gross profit made on the revenue from sales

• The amount of profit made after taxes

How is gross profit margin calculated?

• Gross profit margin = Revenue / Gross profit x 100

• Gross profit margin = Gross profit x 100 / Revenue

• Gross profit margin = Net profit x 100 / Revenue

• Gross profit margin = Revenue x 100 / Gross profit

Which of the following is true about higher gross profit margins?

• They are worse than lower ones

• They indicate a decrease in revenue

• They are better than lower ones

• They suggest an increase in the cost of sales

What can a business do to increase its gross profit margin?

• Decrease revenue

• Increase the cost of sales

• Increase revenue or reduce the cost of sales

• Reduce the number of products sold

How is the operating profit margin (OPM) calculated?

• Operating profit × 100

• Gross profit × 100

• Revenue × 100

• Gross profit margin × Revenue

What does a small difference between the gross profit margin (GPM) and the operating profit margin (OPM) suggest?

• The business has high expenses.

• The business has low expenses.

• The business has high revenue.

• The business has low revenue.

What is the purpose of using mark-up in business?

• To guarantee to recover the costs of production and make a profit.

• To reduce the costs of production.

• To calculate the operating profit margin.

• To determine the gross profit margin.