IGCSE Business Studies – Ratio Analysis (23 MCQs)

Which of the following is a profitability ratio?

• Current ratio

• Acid test ratio

• Gross profit margin

• Trade receivables turnover

Gross profit margin measures:

• Profit as a percentage of revenue

• Gross profit as a percentage of sales revenue

• Net profit as a percentage of total assets

• Expenses as a percentage of sales

The formula for gross profit margin is:

• (Gross Profit + Cost of Sales) × 100

• (Gross Profit ÷ Revenue) × 100

• (Net Profit + Revenue) × 100

• (Gross Profit ÷ Total Assets) × 100

Which ratio shows how efficiently a business controls its overheads?

• Profit margin

• Gross profit margin

• Current ratio

• Acid test ratio

The current ratio measures:

• Profitability

• Liquidity

• Efficiency

• Gearing

The current ratio is calculated as:

• Current Assets + Current Liabilities

• Current Liabilities ÷ Current Assets

• Current Assets – Current Liabilities

• Inventory ÷ Current Liabilities

If a business has a current ratio of 0.8:1, this means:

• The business has strong liquidity

• Current assets are less than current liabilities

• It has more assets than liabilities

• It is overcapitalised

A current ratio of 2:1 generally indicates:

• Too little working capital

• Excessive use of long-term capital

• A comfortable liquidity position

• Low profitability

The acid test ratio excludes:

• Cash

• Inventory

• Trade receivables

• Current liabilities

The acid test ratio formula is:

• (Current Assets – Inventory) ÷ Current Liabilities

• (Current Liabilities – Inventory) ÷ Current Assets

• (Inventory + Cash) ÷ Current Liabilities

• (Current Assets + Inventory) ÷ Current Liabilities