GCSE Business Studies

‘Ratio analysis’ Mini Mock Exam

Name:................................................. Date:......................

What does ROCE stand for? (1)

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What does ‘liquidity’ of a business refer to? (2)

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Rank the following assets on the liquidity scale below: (5)

(stock, cash in bank, buildings, cash in hand, company car)

______________ (most liquid)

______________

______________

______________

______________ (least liquid)

An oil company make 69%, a supermarket make 20% and a local butchers make 32% on
their Gross Profit Ratios. Explain why these values are not very useful in helping us to
understand how well each business is actually doing (2)

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State and explain why 2 different stakeholders would be interested in a business

conducting ratio analysis on their accounts. (2)

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Priyanka owns a small florist shop. Her Trading Profit and Loss account for the last two
years are as shown below:

2008 20 2007
08

£ £ £ £

Sales 120 000 100 000

Less Purchases 74 000 60 000

Gross Profit 46 000 40 000

Less Expenses

Rent 10 000 10 000

Wages 25 000 24 000

Electricity 2 500 2 200

Advertising 1 000 300

38 500 36 500

Net Profit 7 500 3 500

Calculate the gross and net profit margins for each year (4)

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Comment on the performance of the business (2)

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Suggest one way of Priyanka improving profitability of her flower shop (1)

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Explain why you cannot judge the success of the business using only the above
information (2)

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Below is the financial documents for Fishman, a privately owned fish and chip store. Fill
in the blank parts of each document respectively: (7)

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For the year

to 31
December
2008 For
the year to As at
31 ______
December ______
2008 For ______
the year to As at
31 ______
December ______
For the year to 31 December 2008 2008 As at __________________ ______

£ £ £ £ £

Fixed
Sales 50000 Fixed Assets Assets

o
p
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n
i
n
g

s
t
o
c
k
opening stock premises 6900

Purchases P 31000 machinery machine 2500

u ry
r
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h
a
s
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s

34000 Van

c
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g

s
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k
closing stock 4000 12600

C
o
s
t

o
f

s
a
l
e
s Current
Cost of sales 30000 Current Assets Assets

G
R
O
S
S

P
R
O
F
I
T
GROSS PROFIT 20000 Stock

Wages 10000 Debtors 5500

Rent 5000 Cash

other expenses o 3000 9800

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Current
Current liabilities liabilities

net profit 2000 Creditors 1700

Net
Current
Net Current Assets Assets

NET
ASSET
NET ASSETS S 20700

Finance
Financed by d by

Owners
Owners capital capital 18000

net profit 2000

long
term
bank
long term bank loan loan 700

20700

Calculate gross profit to sales: (2)

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Calculate net profit to sales: (2)

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Calculate ROCE: (2)

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Calculate Current test ratio: (2)

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Calculate Acid test ratio: (2)

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Comment on the ratios for the business and highlight any concerns and suggestions for
the business: (4)

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Below are recent financial figures for two businesses. Using appropriate ratios decide
which company has performed better in 2008 and more able to meet its financial
commitments- use right hand side for calculations: (8)

Fixed
th
Fixed assets Balance assets
sheet as at 2625,000
January 2009 7,500

Stock 29,000 12,000

Debtors 14,000 5,000

Cash 14,000 10,000

Total
current
Total current assets assets 57,000 27,000

Current liabilities Current 25,500 20,000

 liabilities

Net current
Net current assets assets 31,500 7,000

ASSETS
EMPLOYE
ASSETS EMPLOYED D 56,500 14,500

Loans 1,000 0

Share
Share capital capital 11,000 3,000

Reserves 44,500 11,500

CAPITAL
EMPLOYE
CAPITAL EMPLOYED D 56,500 14,500

2,008 2,008

Sales
Sales revenue revenue 142,000 81,000

Cost of
Cost of sales sales 60,000 44,000

Gross
profit 82,000 37,000

Operating
Operating expenses expenses 59,950 30,000

operating
operating profit profit 22,050 7,000

Interest 50 300

Pre tax
Pre tax profit profit 22,000 7,300

Taxation 7,000 2,300

Profit after
Profit after tax tax 15,000 5,000

Dividends 11,000 0

Retained
Retained profit profit 4,000 5,000
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END

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