1.6. Analysis and communication of accounting information
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 137 questions
The directors of B Limited have provided the following information. Statement of financial position at 31 December 2020 Assets $ Non-current assets 656 000 Current assets Inventory 34 000 Trade receivables 31 000 65 000 Total assets 721 000 Equity and liabilities Equity Issued share capital 500 000 Share premium 67 000 Retained earnings 68 000 Total equity 635 000 Non-current liabilities 8% Debenture (2025) 50 000 50 000 Current liabilities Trade payables 19 000 Cash and cash equivalents 17 000 36 000 Total liabilities 86 000 Total equity and liabilities 721 000 The company’s revenue for the year ended 31 December 2020 was $540 000 of which 60% was on credit. The company’s profit for the year was $80 000. REQUIRED Calculate the following ratios at 31 December 2020. Current ratio (to two decimal places) Trade receivables turnover Return on capital employed (to two decimal places) Additional information The following ratios are available for 2019 along with comparative ratios for 2018. At 31 December At 31 December Current ratio 2.20 : 1 2.10 : 1 Trade receivables turnover 37 days 38 days Return on capital employed 15.57% 14.32% REQUIRED Compare the company’s position at 31 December 2020 with that of the previous two years in regard to the following ratios: Current ratio Trade receivables turnover Return on capital employed State two ways in which a company could improve its current ratio. Additional information Companies compare their financial performance with that of different businesses. REQUIRED State three limitations of comparing the financial performance of different businesses.
9706_m21_qp_22
THEORY
2021
Paper 2, Variant 2
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Haniya wished to compare some ratios for her business. The following information is available for the year ended 30 November 2021. Acid test ratio 0.8:1 Trade receivables turnover 34 days Trade payables turnover 36 days The following extract was taken from the statement of financial position at 30 November 2022. $ Current assets Inventory 11 500 Trade receivables 9 600 Cash at bank 6 250 27 350 Current liabilities Bank loan 10 000 Other payables 1 720 Trade payables 6 580 18 300 For the year ended 30 November 2022 credit sales totalled $94 800 and credit purchases totalled $88 300. REQUIRED Calculate each of the following ratios for the year ended 30 November 2022. Acid test ratio (to two decimal places) Trade receivables turnover Trade payables turnover Explain the importance of the acid test ratio to a business. Identify two ways in which the owner of a business could improve the acid test ratio. Discuss the changes that have occurred in the trade receivables turnover ratio and the trade payables turnover ratio for Haniya’s business during the year ended 30 November 2022.
9706_m23_qp_22
THEORY
2023
Paper 2, Variant 2
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Questions Discovered
137