Accounting Information and Ratios

Worked examples (10)

• 1Internal or external user? (4 marks)
• 2Match the user to the information (5 marks)
• 3Why a lender wants the statements (4 marks)
• 4Managers' use of information (4 marks)
• 5Which ratios for which user (5 marks)
• 6Conflicting interests (4 marks)
• 7Limitations of the information (5 marks)
• 8Why a customer is interested (4 marks)
• 9Government and public bodies (4 marks)
• 10Communicating to a user (5 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 3 evaluation style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 3 style

Worked examples (10)

• 1Gross profit margin and mark-up (4 marks)
• 2Profit margin (3 marks)
• 3Return on capital employed (5 marks)
• 4Expenses to revenue ratio (4 marks)
• 5Compare gross and profit margins (5 marks)
• 6Evaluate ROCE against borrowing cost (5 marks)
• 7Causes of a falling gross margin (5 marks)
• 8How to improve ROCE (4 marks)
• 9Full set of profitability ratios (6 marks)
• 10Overall evaluation of profitability (6 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 3 evaluation style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 3 evaluation style

Worked examples (10)

• 1Non-current asset turnover (3 marks)
• 2Receivables collection period (4 marks)
• 3Payables payment period (4 marks)
• 4Inventory turnover (days and times) (5 marks)
• 5Interpret a rising collection period (5 marks)
• 6Trade-off in paying suppliers later (5 marks)
• 7Interpret rising inventory days (4 marks)
• 8Collect-before-pay comparison (5 marks)
• 9Caution interpreting asset turnover (4 marks)
• 10Evaluate efficiency over two years (6 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 3 evaluation style
• ✓Model answer — 9706 Paper 3 evaluation style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 3 evaluation style

Worked examples (10)

• 1Current ratio (3 marks)
• 2Acid test ratio (4 marks)
• 3Both liquidity ratios (5 marks)
• 4Interpret the ratios (4 marks)
• 5When a high ratio is a problem (4 marks)
• 6Profitable but illiquid (5 marks)
• 7Measures to improve liquidity (5 marks)
• 8Signs of overtrading (5 marks)
• 9Liquidity depends on the business (4 marks)
• 10Evaluate a liquidity trend (6 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 3 evaluation style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 3 evaluation style

Worked examples (10)

• 1Interpret a single change (4 marks)
• 2Why a single figure means little (4 marks)
• 3Link efficiency to liquidity (5 marks)
• 4Margin vs asset turnover (5 marks)
• 5Match actions to weaknesses (5 marks)
• 6Limitations of ratio analysis (5 marks)
• 7Why comparisons can mislead (4 marks)
• 8Window dressing (4 marks)
• 9Full performance evaluation (6 marks)
• 10Qualify a conclusion (5 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 3 evaluation style
• ✓Model answer — 9706 Paper 3 evaluation style
• ✓Model answer — 9706 Paper 3 style
• ✓Model answer — 9706 Paper 2/3 style
• ✓Model answer — 9706 Paper 2 style
• ✓Model answer — 9706 Paper 3 evaluation style