Analysis and Interpretation

Worked examples (6)

• 1Interpret a fall in gross profit margin (2 marks)
• 2Interpret a rise in the trade receivables collection period (3 marks)
• 3Compare the current ratio with the quick ratio (4 marks)
• 4Explain what a change in ROCE tells an investor (4 marks)
• 5Interpret a full set of ratios and compare two years (8 marks)
• 6Recommend actions to improve liquidity and profitability (6 marks)

Model answers (6)

• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 analysis/interpretation style
• ✓Model answer — Paper 2 evaluation (AO3) style

Worked examples (6)

• 1Calculating the gross profit margin (2 marks)
• 2Calculating the current ratio (2 marks)
• 3Trade receivables collection period (3 marks)
• 4Rate of inventory turnover in times per year (3 marks)
• 5Calculating all three profitability ratios (6 marks)
• 6Liquidity and efficiency ratios from a full statement extract (8 marks)

Model answers (6)

• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 analysis/interpretation style
• ✓Model answer — Paper 2 evaluation (AO3) style
• ✓Model answer — Paper 2 analysis/interpretation style

Worked examples (6)

• 1Compare Two Businesses' Gross Profit Margins (3 marks)
• 2Identify Why a Comparison May Mislead (3 marks)
• 3Margin Says One Thing, ROCE Says Another (5 marks)
• 4Judge Liquidity From Two Ratios (4 marks)
• 5Full Comparison and Investment Decision (12 marks)
• 6Restate Profit to Make a Fair Comparison (6 marks)

Model answers (6)

• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 evaluation (AO3) style
• ✓Model answer — Paper 2 evaluation style

Worked examples (6)

• 1Match each user to what they want to know (3 marks)
• 2Name three users and state one interest each (3 marks)
• 3Explain why a bank is interested before lending (4 marks)
• 4Which figures would a supplier focus on? (4 marks)
• 5Why two users want different information (6 marks)
• 6Which users are most affected by a downturn? (6 marks)

Model answers (6)

• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 evaluation (AO3) style
• ✓Model answer — Paper 2 analysis/interpretation style

Worked examples (6)

• 1Identifying limitations from a scenario (2 marks)
• 2Classifying factors as financial or non-financial (2 marks)
• 3Explaining why historic cost can mislead (4 marks)
• 4Estimates, judgement and window dressing (4 marks)
• 5Why comparing two businesses is difficult (6 marks)
• 6Evaluating how much to rely on the statements (8 marks)

Model answers (6)

• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 1 short-answer style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 structured style
• ✓Model answer — Paper 2 evaluation (AO3) style
• ✓Model answer — Paper 2 evaluation style