Calculation and evaluation of ratios: past paper questions
Real questions on calculation and evaluation of ratios
The newest 20 of 175 written questions. Open one to see it on the real paper.
- 9706/21 · October/November 2025 · Q3d[5]
Calculate the inventory turnover (days) for each of the years ended 31 December 2023 and 2024. Year ended 31 December 2023 Year ended 31 December 2024 Additional information The directors wish to improve the inventory turnover (days) ratio. One director has suggested reducing inventory levels.
See it on the paper → - 9706/21 · October/November 2025 · Q3e[2]
Identify two possible drawbacks which could result from this suggestion.
See it on the paper → - 9706/21 · October/November 2025 · Q3f[2]
Identify two ways in which the inventory turnover (days) ratio could be improved other than by reducing inventory levels.
See it on the paper → - 9706/23 · October/November 2025 · Q3c[3]
State three factors that directors should consider when deciding the amount to be paid as a final dividend.
See it on the paper → - 9706/32 · October/November 2025 · Q2g[4]
State two differences between external and internal auditors.
See it on the paper → - 9706/33 · October/November 2025 · Q3c[14]
Calculate, to two decimal places, the dividend cover in 2025 and the gearing ratio at 31 December 2025 for each option. Option 1 Option 2 Dividend cover Gearing ratio Workings: Additional information The directors decided to implement Option 1.
See it on the paper → - 9706/33 · October/November 2025 · Q3d[1]
Assess whether or not the directors made the right decision in choosing Option 1. Justify your answer.
See it on the paper → - 9706/21 · May/June 2025 · Q3a[2]
State the formula for calculating each of the following ratios. Gross profit margin Profit margin
See it on the paper → - 9706/21 · May/June 2025 · Q3b[2]
Suggest two reasons which could explain the increase in the gross profit margin comparing 2024 with 2023.
See it on the paper → - 9706/21 · May/June 2025 · Q3c[2]
Suggest two reasons which could explain the decrease in profit margin comparing 2024 with 2023, despite the increase in the gross profit margin. Additional information Khaled has compared the recent liquidity ratios for his business with ratios for businesses of a similar size and trading in the same goods. Khaled’s bu...
See it on the paper → - 9706/21 · May/June 2025 · Q3d[5]
Explain with reasons whether or not you agree with Khaled’s view of his business’s liquidity position. Justify your answer by commenting on both ratios. Additional information Khaled is aware that size of business and trading in similar goods are not the only factors to be considered in making comparisons with similar...
See it on the paper → - 9706/21 · May/June 2025 · Q3e[4]
Explain two other reasons why Khaled may find it difficult to make valid comparisons with similar businesses.
See it on the paper → - 9706/23 · May/June 2025 · Q3a[2]
State the formula for calculating each of the following ratios. Gross profit margin Profit margin
See it on the paper → - 9706/23 · May/June 2025 · Q3b[2]
Suggest two reasons which could explain the increase in the gross profit margin comparing 2024 with 2023.
See it on the paper → - 9706/23 · May/June 2025 · Q3c[2]
Suggest two reasons which could explain the decrease in profit margin comparing 2024 with 2023, despite the increase in the gross profit margin. Additional information Khaled has compared the recent liquidity ratios for his business with ratios for businesses of a similar size and trading in the same goods. Khaled’s bu...
See it on the paper → - 9706/23 · May/June 2025 · Q3d[5]
Explain with reasons whether or not you agree with Khaled’s view of his business’s liquidity position. Justify your answer by commenting on both ratios. Additional information Khaled is aware that size of business and trading in similar goods are not the only factors to be considered in making comparisons with similar...
See it on the paper → - 9706/23 · May/June 2025 · Q3e[4]
Explain two other reasons why Khaled may find it difficult to make valid comparisons with similar businesses.
See it on the paper → - 9706/31 · May/June 2025 · Q2b[2]
Calculate, to two decimal places, the return on capital employed for the year 2024.
See it on the paper → - 9706/31 · May/June 2025 · Q2c(i)[2]
Calculate, to two decimal places, the gearing ratio for both the years 2023 and 2024.
See it on the paper → - 9706/31 · May/June 2025 · Q2c(ii)[4]
Comment on the gearing ratio with reference to the calculations in (c)(i). Additional information The 2023 interim dividend was $0.05 per share. TN plc had a dividend cover of 1.8 times in 2023. In considering the proposed 2024 final dividend, the directors suggest that the dividend cover for 2024 should be increased t...
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What examiners said
Nearly all candidates stated one limitation. There were some submissions containing two acceptable limitations but only a few which provided three limitations.
— Examiner report, February/March 2025, 9706/32 Q3(a) (Cambridge)
The ratios were calculated to a high standard with many candidates calculating them all correctly. The price/earnings ratio had the most correct answers with the gearing ratio having the least correct answers. Common errors included the use of the 2023 final dividend in the dividend yield calculation and not including the debentures in the denominator when calculating the gearing ratio. A few cand...
— Examiner report, February/March 2025, 9706/32 Q3(b) (Cambridge)
The ratios were calculated to a high standard with many candidates calculating them all correctly. The price/earnings ratio had the most correct answers with the gearing ratio having the least correct answers. Common errors included the use of the 2023 final dividend in the dividend yield calculation and not including the debentures in the denominator when calculating the gearing ratio. A few cand...
— Examiner report, February/March 2025, 9706/32 Q3(b) (Cambridge)
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