IGCSE Accounting: Calculating and interpreting accounting ratios (Cambridge 0452) – Practice Questions

Syllabus edition note. This resource follows the Cambridge IGCSE Accounting 0452 syllabus (and Cambridge O Level Accounting 7707, which has the same subject content for the same series) for exams in 2027, 2028 and 2029 (version 1), first examined in the March 2027 series in India and the June 2027 series elsewhere. If you sit 0452 in November 2026, you sit the 2026 syllabus (version 2), which differs: Paper 1 has 35 multiple-choice marks in 1 hour 15 minutes, not 40 marks in 1 hour 30 minutes; Topic 7 is “Accounting principles and policies”, without 7.2 Ethical considerations or 7.3 Technology and sustainability; 4.4 is “Irrecoverable debts and provision for doubtful debts”; income statements are named instead of statements of profit or loss; three-column running balance accounts are not required; Clubs and societies is 5.4 and Manufacturing accounts 5.5; and 6.3 is “Inter-firm comparison”. For this topic, the 2026 syllabus lists eight ratios without inventory turnover in days (mark-up appears only in its ratio appendix), names ROCE’s numerator “net profit before interest”, lists interested parties as owners, managers, trade payables, banks, investors, club members and others such as governments and tax authorities, and gives the limitations of accounting statements as historic cost, difficulties of definition and non-financial aspects. If you sit in November 2026, work from the 2026 syllabus on the Cambridge International website.

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 syllabus sections 6.1 (Calculation and understanding of accounting ratios) and 6.2 (Interpretation of accounting ratios) of the Cambridge IGCSE Accounting syllabus (0452, version 1) for exams in 2027, 2028 and 2029. The syllabus text divides no content by tier. Give each answer to 2 decimal places; amounts are in $. Use the study guide or revision notes first. Course links: hub and checklist.

Questions

1. Ostlers Fabrics, a sole trader, had revenue of 156,000 and cost of sales of 117,000. Calculate the gross profit, the gross profit margin and the mark-up. [3]

2. Quayside Marine Supplies Limited has inventory 46,000, trade receivables 31,500, bank 6,500, trade payables 28,000 and other payables 7,000. Work out the current ratio, then the acid test ratio. [4]

3. Vesper Lighting Limited made a profit for the year of 47,250 after paying 9% debenture interest of 6,750. Issued shares are 200,000, the general reserve 30,000, retained earnings 70,000 and the debentures 75,000. Calculate the return on capital employed (ROCE). [4]

4. Holloway-Reed Tools had opening inventory of 21,000, closing inventory of 27,000 and cost of sales of 216,000. (a) Calculate the average inventory. [1] (b) Calculate the rate of inventory turnover. [1] (c) Calculate the inventory turnover in days. [1]

5. Fenwick-Lowe Furnishings had total sales of 210,000, of which 42,000 were for cash. Credit purchases were 120,000. Trade receivables were 23,000 and trade payables 16,000. Customers are allowed 30 days and suppliers allow 45 days. (a) Calculate the trade receivables turnover in days. [2] (b) Calculate the trade payables turnover in days. [1] (c) Comment on each result against the credit terms. [2]

6. Ostlers Fabrics provides these figures.

                          2025        2026
Revenue                156,000     171,600
Cost of sales          117,000     133,848
Other income             2,400         900
Expenses                27,300      30,420

(a) Prepare a statement comparing the two years, showing gross profit, profit for the year and the change in each line. [3] (b) Comment on the change in profit for the year. [3]

7. Salcombe Interiors allows customers 30 days and receives 45 days’ credit.

                                   2025        2026
Acid test ratio                  1.20 : 1    0.62 : 1
Trade receivables turnover       34.20 days  58.10 days
Trade payables turnover          41.80 days  33.50 days

(a) Explain what the fall in the acid test ratio shows. [2] (b) Explain how the receivables and payables figures have worsened the cash position. [2] (c) Recommend two actions to improve liquidity. [2]

8. Thrushwood Bakeries, a sole trader, earned a profit for the year of 24,000 but the bank balance fell by 3,500. During the year depreciation was 4,000, an oven cost 18,000 (paid by bank), inventory rose by 1,500, trade receivables rose by 5,000, trade payables rose by 2,000 and drawings were 9,000. (a) Show how the profit led to the fall in the bank balance. [5]

9. Vesper Lighting Limited’s gross profit margin was 38.00% in both years. Its profit margin fell from 11.00% to 8.50%. Profit before interest rose from 54,000 to 57,000 while capital employed rose from 375,000 to 450,000. (a) Explain what an unchanged gross profit margin alongside a falling profit margin suggests, giving one possible cause. [2] (b) Calculate ROCE for each year and explain why it fell although profit before interest rose. [2]

10. Wyndmere Garden Supplies Limited cut prices, allowed trade customers longer to pay and borrowed 100,000 at 8% for a second showroom. For 2026: revenue 520,000; cost of sales 338,000; other income 4,000; expenses 119,600; shares 200,000; reserves 85,000; inventory 62,000; trade receivables 78,000; bank 5,000; trade payables 52,000; other payables 8,000; credit sales 416,000. Customers are allowed 30 days. The 2025 ratios were: gross profit margin 38.00%, profit margin 13.00%, ROCE 19.20%, acid test 1.55 : 1, receivables 36.00 days. (a) Calculate for 2026: the gross profit margin [1], the profit margin [1], ROCE [2], the acid test ratio [1] and trade receivables turnover [1]. (b) Compare profitability in 2026 with 2025, giving reasons. [3] (c) Comment on liquidity and recommend one action. [3]

11. Teasel Cycles buys and sells bicycles. For each event, state what happens to gross profit and to the gross profit margin (increase, decrease or no change). (i) Closing inventory is undervalued by 2,000. [2] (ii) The units sold rise by 15% at unchanged prices and costs per unit. [2] (iii) Selling prices rise by 4% with units and costs unchanged. [2] (iv) Purchase prices rise but selling prices stay the same. [2]

Answers

1. Gross profit = 156,000 - 117,000 = 39,000 [1]. Gross profit margin = 39,000/156,000 x 100 = 25.00% [1]. Mark-up = 39,000/117,000 x 100 = 33.33% [1]. [3] Examiner insight: Both ratios use the same gross profit; only the divisor differs.

2. Current assets = 46,000 + 31,500 + 6,500 = 84,000 [1]. Current liabilities = 28,000 + 7,000 = 35,000. Current ratio = 84,000 : 35,000 = 2.40 : 1 [1]. Acid test numerator = 84,000 - 46,000 = 38,000 [1]. Acid test = 38,000 : 35,000 = 1.09 : 1 [1]. [4] Examiner insight: The question asks for ratios, so a percentage does not match the requested form.

3. Profit before interest = 47,250 + 6,750 = 54,000 [1]. Capital employed = 200,000 + (30,000 + 70,000) + 75,000 = 375,000 [1]. ROCE = 54,000/375,000 x 100 [1] = 14.40% [1]. [4] Examiner insight: Interest is added back because the debentures sit inside capital employed.

4. (a) (21,000 + 27,000)/2 = 24,000 [1]. (b) 216,000/24,000 = 9.00 times [1]. (c) 24,000/216,000 x 365 = 40.56 days [1]. [3] Examiner insight: Both inventory ratios use average inventory.

5. (a) Credit sales = 210,000 - 42,000 = 168,000 [1]. 23,000/168,000 x 365 = 49.97 days [1]. (b) 16,000/120,000 x 365 = 48.67 days [1]. (c) Customers take about 20 days longer than the 30 allowed [1]. Fenwick-Lowe pays suppliers after about 49 days, later than the 45 allowed, which may harm goodwill [1]. [5] Examiner insight: Compare each figure with its credit period.

6. (a) Gross profit 39,000 and 37,752; profit for the year 14,100 and 8,232 [1][1]. Changes: revenue +15,600, cost of sales +16,848, gross profit -1,248, other income -1,500, expenses +3,120, profit -5,868 [1]. (b) Gross profit fell by 1,248 although revenue rose, because cost of sales rose faster [1]. Other income fell by 1,500 [1] and expenses rose by 3,120 [1], so profit for the year fell by 5,868. [6] Examiner insight: Name each line, its size and its effect on profit.

7. (a) The acid test fell from 1.20 : 1 to 0.62 : 1, so liquid assets no longer cover current liabilities [1]; the business relies on selling inventory or borrowing to pay its debts [1]. (b) Customers take 58.10 days against 30 allowed, so cash arrives later [1]; suppliers are paid in 33.50 days against 45 allowed, so cash leaves earlier [1]. (c) Any two, such as chasing overdue customers, offering a cash discount or using the full 45 days’ credit [1][1]. [6] Examiner insight: Tie each recommendation to the ratio it should repair.

8. 24,000 + 4,000 - 18,000 - 1,500 - 5,000 + 2,000 - 9,000 = -3,500.

Profit and depreciation [1]; oven [1]; inventory, receivables and payables changes [1]; drawings [1]; correct total of -3,500 [1]. [5] Examiner insight: Give the direction and size of each item.

9. (a) Trading is unchanged, so the problem is below gross profit [1]: for example, higher expenses, higher interest or lower other income [1]. (b) ROCE 2025 = 54,000/375,000 x 100 = 14.40% and 2026 = 57,000/450,000 x 100 = 12.67% [1]. Capital employed rose by 75,000 (20.00%) while profit before interest rose by only 3,000, so the return per $100 of capital fell [1]. [4] Examiner insight: The question asks for both calculations and a reason, so give both.

10. (a) Gross profit 182,000; margin = 182,000/520,000 x 100 = 35.00% [1]. Profit for the year = 182,000 + 4,000 - 119,600 - 8,000 = 58,400; margin = 58,400/520,000 x 100 = 11.23% [1]. Capital employed = 200,000 + 85,000 + 100,000 = 385,000 and profit before interest = 66,400 [1]; ROCE = 66,400/385,000 x 100 = 17.25% [1]. Acid test = (145,000 - 62,000) : 60,000 = 1.38 : 1 [1]. Receivables days = 78,000/416,000 x 365 = 68.44 days [1]. (b) The gross profit margin fell from 38.00% to 35.00% because prices were cut [1]. The profit margin fell by only 1.77 points, so costs took a smaller share of revenue [1]. ROCE fell to 17.25% because the new loan raised capital employed without a matching rise in profit [1]. (c) The acid test fell from 1.55 : 1 to 1.38 : 1 and receivables days rose from 36.00 to 68.44, over twice the 30 allowed [1], tying up cash [1]. One action, such as chasing overdue accounts [1]. [12] Examiner insight: Quote figures from both years in the comments.

11. (i) Gross profit decreases [1]; gross profit margin decreases [1]. (ii) Gross profit increases [1]; gross profit margin no change [1]. (iii) Gross profit increases [1]; gross profit margin increases [1]. (iv) Gross profit decreases [1]; gross profit margin decreases [1]. [8] Examiner insight: Sales quantity changes gross profit but not the margin.

Where marks are usually lost

• Giving the current ratio or acid test as a percentage.
• Leaving interest in profit when calculating ROCE.
• Dividing by closing inventory instead of average inventory.
• Swapping gross profit margin and mark-up.
• Describing a change without a reason from the scenario.
• Recommending an action that does not match the weak ratio.

Next steps

• Review the revision notes and the study guide.
• Try the Analysis and interpretation practice questions and all free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

How is the current ratio presented in Cambridge IGCSE Accounting (0452)? The current ratio and acid test are ratios, not percentages, so write them in the form 2.66 : 1. Giving them as a percentage, or without the “to 1”, loses marks.

Why is interest added back to profit for ROCE? Capital employed includes non-current liabilities such as loans, so the interest paid to those lenders is added back to profit for the year. Leaving interest deducted understates ROCE.

How do you make a recommendation from ratio analysis? Match each suggestion to the weak ratio and say what it should change, for example collecting from customers within the credit period to reduce trade receivables days. A recommendation that does not match the weak ratio earns little credit.

How many decimal places should ratio answers have? Give ratios to 2 decimal places unless the question says otherwise, with the correct unit such as %, times, days or : 1.

Official syllabus

Cambridge IGCSE Accounting syllabus (0452, version 1) for exams in 2027, 2028 and 2029, published by Cambridge University Press & Assessment (sections 6.1 and 6.2).