Edexcel IGCSE Business: Financial documents and accounts analysis (4BS1) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover Topic 3, sections 3.4 and 3.5 of the Pearson Edexcel International GCSE in Business (4BS1) specification, Issue 2, February 2026. Use the study guide and revision notes first if needed. Course links: the Edexcel IGCSE Business hub, the printable checklist and the free diagnostics. Businesses are invented; amounts are in dollars. Round percentages to 2 decimal places when they do not divide exactly; show liquidity ratios as x : 1, also to 2 decimal places.

Questions

1. Brindle Bakes had revenue of 150,000, cost of sales of 97,500 and other operating expenses of 33,000.

(a) Work out the gross profit. [1] (b) Work out the gross profit margin. [2] (c) Work out the operating profit. [1] (d) Work out the operating profit margin. [2]

2. Explain one reason why profit is important to a business. [3]

3. Ferrow Hardware buys a toolkit for 36 and sells it for 51.

(a) Calculate the markup. [2] (b) Another item costs 48. The owner wants a markup of 75%. Calculate the selling price. [2]

4. Complete the table by classifying each item as a current asset, non-current asset, current liability or non-current liability. [6]

Item	Classification
Delivery van
Inventory
Trade payables
Bank loan repayable in six years
Trade receivables
Bank overdraft

5. Kestrel Signs has non-current assets of 140,000, current assets of 60,000, current liabilities of 35,000 and non-current liabilities of 45,000. Operating profit was 21,750.

(a) Work out the capital employed. [2] (b) Work out ROCE. [2] (c) Outline why the owner would find ROCE useful. [2]

6. Marwood Garden Centre had revenue of 320,000, a gross profit margin of 35% and an operating profit margin of 8%. Calculate gross profit, operating profit, cost of sales and other operating expenses. [4]

7. Tarnway Tools has these figures at its year end: non-current assets 95,000; inventory 18,000; trade receivables 9,000; cash 3,000; trade payables 21,000; bank overdraft 12,000; 40,000 owed on a bank loan that is repayable in five years.

(a) Calculate capital employed. [2] (b) Calculate the current ratio. [2] (c) Calculate the acid test ratio. [2] (d) Analyse one problem these ratios could cause Tarnway Tools. [3]

8. Quillon Electrical is a small business. Its figures are:

	Year 1	Year 2
Revenue	200,000	260,000
Gross profit	70,000	84,500
Operating profit	24,000	23,400
Capital employed	120,000	130,000
Current assets	54,000	62,000
Inventory	20,000	34,000
Current liabilities	36,000	50,000

(a) Calculate, for both years, the gross profit margin, operating profit margin, ROCE, current ratio and acid test ratio. [5] (b) Analyse the change in performance between Year 1 and Year 2. [4]

9. Two wholesalers, Harlow and Dunmere, each have revenue of 500,000. A supplier must choose which one to offer 90 days of credit.

	Harlow	Dunmere
Gross profit	150,000	200,000
Operating profit	40,000	45,000
Capital employed	250,000	300,000
Current assets	90,000	80,000
Inventory	20,000	55,000
Current liabilities	60,000	70,000

Justify which wholesaler the supplier should choose. [8]

10. Sunbury Stores holds current assets of 48,000, including inventory of 24,000. Its current liabilities are 30,000.

(a) Find the current ratio and, separately, the acid test ratio. [2] (b) The owner buys 12,000 of inventory on credit. Calculate both ratios again. [3] (c) Explain one reason why liquidity matters to a business. [3]

11. Cresswell Cycles sells bicycles from one shop. The owner is thinking of borrowing 60,000 to open a second shop.

	Year 1	Year 2
Revenue	180,000	230,000
Gross profit margin	42%	42%
Operating profit margin	14%	11%
ROCE	19%	15%
Current ratio	2.2 : 1	1.3 : 1
Acid test ratio	1.0 : 1	0.6 : 1

Evaluate whether the owner should go ahead with the loan. [8]

Answers

1. (a) 150,000 − 97,500 = 52,500 [1]. (b) 52,500 ÷ 150,000 [1] × 100 = 35% [1]. (c) 52,500 − 33,000 = 19,500 [1]. (d) 19,500 ÷ 150,000 [1] × 100 = 13% [1]. Examiner insight: Gross profit is needed again in part (c), so show each line of working.

2. Retained profit can fund new equipment [1]. The owner then has no need to borrow [1], so interest is avoided and the business can grow faster [1]. [3] Examiner insight: An explain answer is one point plus two developments; a list with no development tends to earn less.

3. (a) Profit = 51 − 36 = 15 [1]. 15 ÷ 36 × 100 = 41.67% [1]. (b) Profit = 48 × 0.75 = 36 [1]; price = 48 + 36 = 84 [1]. Examiner insight: Markup is measured against cost; dividing by 51 would give the margin, a different figure.

4. Delivery van: non-current asset [1]. Inventory: current asset [1]. Trade payables: current liability [1]. Bank loan repayable in six years: non-current liability [1]. Trade receivables: current asset [1]. Bank overdraft: current liability [1]. [6] Examiner insight: The deciding test is the one-year line: the loan is a liability but falls due after more than a year.

5. (a) 140,000 + 60,000 − 35,000 [1] = 165,000 [1]. Check: equity 120,000 + 45,000. (b) 21,750 ÷ 165,000 [1] × 100 = 13.18% [1]. (c) ROCE shows the return the business earns on the long-term funds invested [1]. The owner can compare it with last year or with what the money could earn elsewhere, to decide whether it is worth keeping the money in the business [1]. [2] Examiner insight: Capital employed must include the non-current liabilities, which is why the check against equity plus loans is worth doing.

6. Gross profit = 320,000 × 0.35 = 112,000 [1]. Operating profit = 320,000 × 0.08 = 25,600 [1]. Cost of sales = 320,000 − 112,000 = 208,000 [1]. Other operating expenses = 112,000 − 25,600 = 86,400 [1]. [4] Examiner insight: Working back from a margin starts with revenue multiplied by the percentage; show that line before the subtractions.

7. (a) Current assets = 18,000 + 9,000 + 3,000 = 30,000; current liabilities = 21,000 + 12,000 = 33,000 [1]. Capital employed = 95,000 + 30,000 − 33,000 = 92,000 [1]. (b) 30,000 ÷ 33,000 [1] = 0.91 : 1 [1]. (c) (30,000 − 18,000) ÷ 33,000 [1] = 0.36 : 1 [1]. (d) Current liabilities are larger than current assets, so the business may struggle to pay on time [1]. The acid test of 0.36 : 1 means it has about 36 cents of liquid assets for every dollar owed [1]. Suppliers may stop credit or the bank may demand the overdraft back, which could force the business to close [1]. [3] Examiner insight: The overdraft belongs in current liabilities; leaving it out changes capital employed and both ratios.

8. (a) Gross profit margin: 35.0% and 32.5% [1]. Operating profit margin: 12.0% and 9.0% [1]. ROCE: 20.0% and 18.0% [1]. Current ratio: 1.50 : 1 and 1.24 : 1 [1]. Acid test: 0.94 : 1 and 0.56 : 1 [1]. (b) Revenue rose by 30%, but operating profit fell from 24,000 to 23,400, so growth did not raise profit [1]. Both margins fell, which suggests costs rose faster than sales [1]. ROCE slipped from 20.0% to 18.0%, so each dollar of capital employed earned less [1]. Liquidity weakened: inventory rose by 14,000 and the acid test dropped from 0.94 : 1 to 0.56 : 1, leaving less quick cover for its debts [1]. [4] Examiner insight: Analysis answers tend to gain credit when each ratio change is tied to a figure from the table and to a consequence for the business, not just described as “worse”.

9. Calculations: Harlow gross margin 30%, operating margin 8%, ROCE 16%, current ratio 1.50 : 1, acid test 1.17 : 1. Dunmere gross margin 40%, operating margin 9%, ROCE 15%, current ratio 1.14 : 1, acid test 0.36 : 1 [2]. For Dunmere: its margins are higher, so it earns more on each sale [1], and its operating profit is larger at 45,000 [1]. For Harlow: its current ratio and acid test ratio are much stronger, so it is better placed to pay a supplier in 90 days [1], while Dunmere’s acid test below 1 : 1 depends on selling its 55,000 of inventory first [1]. Judgement: the supplier needs to be paid, so liquidity matters most for a credit decision [1]; Harlow is the safer choice, although Dunmere is the more profitable business [1]. [8] Examiner insight: A justify answer recommends one option using the figures given; it is strongest when the measure chosen matches the decision (here, ability to pay) and the other option’s strengths are weighed.

10. (a) 48,000 ÷ 30,000 = 1.60 : 1 [1]; (48,000 − 24,000) ÷ 30,000 = 0.80 : 1 [1]. (b) Current assets = 48,000 + 12,000 = 60,000 and current liabilities = 30,000 + 12,000 = 42,000 [1]. Current ratio = 60,000 ÷ 42,000 = 1.43 : 1 [1]. Acid test = (60,000 − 36,000) ÷ 42,000 = 0.57 : 1 [1]. (c) Liquidity means being able to find cash for bills due soon [1]. Suppliers or staff who are not paid on time may stop working with the business [1], so it can fail even though it is profitable [1]. [3] Examiner insight: Buying stock on credit raises both sides of the ratio, so state the new current assets and new current liabilities before dividing.

11. Points in favour: gross margin held at 42%, so selling prices cover the cost of bicycles [1]; revenue grew by about 28% (180,000 to 230,000) [1]; operating profit is positive and ROCE is 15%, so the business is still earning a return [1]. Points against: operating margin fell from 14% to 11% and ROCE from 19% to 15%, so costs are rising [1]; the current ratio fell from 2.2 : 1 to 1.3 : 1 and the acid test from 1.0 : 1 to 0.6 : 1, so the business already has less cover for its short-term debts [1]; a 60,000 loan would add repayments while liquidity is weak [1]; the figures are historical and give no evidence of demand for a second shop [1]. Judgement: the owner should delay the loan until expenses are under control and liquidity has recovered, because the trend is worsening on the measures that matter most for repaying debt [1]. [8] Examiner insight: Weigh the two sides, then decide; a decision that skips the weakest ratios is hard to defend.

Where marks are usually lost

• Dividing by revenue in ROCE, or by capital employed in a margin.
• Dividing markup by the selling price instead of the cost.
• Leaving the overdraft out of current liabilities.
• Deducting every current asset, rather than only inventory, in the acid test.
• Showing a liquidity ratio as a percentage, or without a unit.
• Writing “it went up” or “it got worse” with no figure and no consequence.
• Giving a justify or evaluate answer that lists points but never reaches a decision.

Next steps

• Revisit the revision notes and the study guide.
• Go to the Edexcel IGCSE Business hub and the printable checklist.
• Take the free 10-minute diagnostics to find weak spots.
• Book a free trial class at /trial/.

Frequently asked questions

What do these financial documents practice questions cover? They follow Pearson Edexcel International GCSE Business (4BS1) sections 3.4 and 3.5: the statement of comprehensive income, the statement of financial position, profit margins, markup, ROCE, the current and acid test ratios, and liquidity.

Are the ratio formulae given in the Edexcel IGCSE Business exam? Yes. The 4BS1 specification says the formulae are provided in the examination, so your job is to apply them and explain the result.

What are the most common ratio mistakes? Dividing by revenue in ROCE or by capital employed in a margin, dividing markup by the selling price instead of the cost, and leaving the overdraft out of current liabilities.

Should a liquidity ratio be written as a percentage? No. The current ratio and acid test ratio are written as a ratio such as 2.0 : 1, not as a percentage.

Official syllabus

Pearson Edexcel International GCSE in Business (4BS1), Specification, Issue 2, February 2026, published by Pearson Education Limited. Topic 3: Business finance, sections 3.4 and 3.5; Appendix 2 (command word taxonomy) and Appendix 4 (formulae).