IGCSE Accounting: Inter-business comparison, interested parties, limits (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 sections 6.3 to 6.5 of Cambridge IGCSE Accounting 0452 (syllabus for exams in 2027, 2028 and 2029, version 1): inter-business comparison, interested parties and limitations of accounting statements. There are no tiers. Learn the content first from the study guide and the revision notes. Course hub: IGCSE Accounting; checklist; free diagnostics. Businesses and figures are invented. Money is in $, and ratios use the syllabus formulas.

Questions

1. Zephra Stationers is a small shop. A national chain of stationers publishes its ratios. State two factors, other than management skill, that may make the chain’s gross profit margin differ from Zephra’s. [2]

2. Stanmoor Cycles Limited and Nettlefold Cycles Limited sell similar bicycles. For the latest year:

                                 Stanmoor      Nettlefold
Profit for the year                36,000          45,000
Interest paid                           0          15,000
Issued shares                     120,000         100,000
Reserves                           60,000          50,000
Loan (non-current)                      0         250,000

(a) Calculate ROCE for each business. [4] (b) Explain one reason why the difference in ROCE may not show that Stanmoor is better managed. [2]

3. Zephra’s year ends on 31 December. A rival’s year ends on 30 June and it publishes only summarised statements. Explain two problems of comparing Zephra’s ratios with the rival’s. [4]

4. Amberley Print Shop has current assets of 52,000, including inventory of 14,000, and current liabilities of 40,000. It has asked its bank for a loan. (a) Calculate the current ratio and the acid test ratio. [2] (b) Explain how the bank might use these ratios, and one other item of accounting information, in deciding whether to lend. [3]

5. Pennyfold Angling Club has 45 members, each paying a subscription of 80 for the year. Its costs for the year were 4,050. (a) Calculate the deficit and the deficit per member. [2] (b) Suggest one action the members could take, and justify it. [3]

6. Zephra Stationers has trade payables of 36,000, credit purchases of 292,000 and a current ratio of 0.9 : 1. Its supplier allows 30 days. (a) Calculate trade payables turnover in days. [2] (b) Advise the supplier whether to continue offering 30 days’ credit, using your answer and one other figure. [3]

7. Harlowe Foods Limited has profit for the year before interest of 63,000, issued shares of 180,000, reserves of 120,000 and a non-current loan of 100,000. A property bought for 90,000 is now worth 210,000. (a) Calculate ROCE with the property at historic cost. [2] (b) Calculate ROCE if the property were shown at its current value, assuming profit is unchanged. [2] (c) Explain why historic cost makes a comparison with a business that bought similar property recently misleading. [2]

8. A business buys a machine for 48,000 with no residual value. Profit before depreciation is 90,000 and revenue is 600,000. It could depreciate using straight line over four years or 40% reducing balance. (a) Calculate the first-year depreciation under each method. [2] (b) Calculate the profit margin under each method. [2] (c) Explain how this is a limitation when comparing two businesses. [2]

9. Amberley Print Shop’s statements show rising profit. Explain how each of the following could affect its future results although the statements do not show it: (i) skill of the workforce; (ii) location of the business; (iii) economic climate. [6]

10. A private investor has money to invest in Stanmoor Cycles Limited or Nettlefold Cycles Limited. Ratios from the statements:

                              Stanmoor     Nettlefold
ROCE                            20.00%         15.00%
Profit margin                   12.00%          9.00%
Current ratio                  2.4 : 1         0.8 : 1
Trade receivables (days)         20.00           55.00

Evaluate which business looks the better investment, referring to the ratios, the position of the investor and the limits of the information. [10]

Answers

1. The chain buys in bulk and may get lower prices [1]; pricing policy or the type of goods sold may differ [1]. (Different accounting policies for inventory would also be a valid factor.) [2] Examiner insight: Answers that only say “better management” or “bigger”, with no link to prices or costs, are unlikely to answer the question set.

2. (a) Stanmoor capital employed = 120,000 + 60,000 = 180,000 [1]; ROCE = 36,000 ÷ 180,000 × 100 = 20.00% [1]. Nettlefold profit before interest = 45,000 + 15,000 = 60,000 and capital employed = 100,000 + 50,000 + 250,000 = 400,000 [1]; ROCE is 60,000 ÷ 400,000 × 100 = 15.00% [1]. (b) Nettlefold is financed mainly by a loan [1], which makes its capital employed larger, so ROCE is lower for the same profit before interest [1]. [6] Examiner insight: Adding interest back before dividing is an easy step to overlook; writing each line out makes your method easier to credit.

3. Different year ends [1]: inventory and receivables would be at different seasonal levels, so ratios are not like for like [1]. Summarised statements [1]: credit sales or credit purchases may be missing, so some ratios cannot be calculated [1]. [4] Examiner insight: Name the problem and then say what it does to the ratios; a bare list of two problems leaves the explanation marks unclaimed.

4. (a) Current ratio = 52,000 ÷ 40,000 = 1.30 : 1 [1]. Acid test = (52,000 - 14,000) ÷ 40,000 = 0.95 : 1 [1]. (b) Acid test below 1 : 1 means liquid assets are less than current liabilities [1], so the bank may worry that repayments depend on selling inventory [1]. Other item: profit for the year shows whether the shop can meet interest, or non-current assets show security available [1]. [5] Examiner insight: Present both answers as ratios, as the syllabus asks, and link them to the bank’s decision rather than only defining them.

5. (a) Deficit = 4,050 - (45 × 80) = 450 [1]; per member = 450 ÷ 45 = 10.00 [1]. (b) Raise subscriptions by about 10.00 per member to cover the deficit [1], because the deficit shows that costs exceed income [1]; but a higher fee may cause members to leave, so the club could instead cut costs [1]. [5] Examiner insight: A suggestion tied to the figure just calculated reads as justified; one with no figure behind it reads as a guess.

6. (a) 36,000 ÷ 292,000 × 365 [1] = 45.00 days [1]. (b) The business pays in 45 days against 30 allowed [1], and a current ratio of 0.9 : 1 means current liabilities exceed current assets [1], so the supplier might shorten credit or ask for earlier payment [1]. [5] Examiner insight: “Advise” asks for a course of action backed by figures, not a restatement of them.

7. (a) Capital employed = 180,000 + 120,000 + 100,000 = 400,000; ROCE = 63,000 ÷ 400,000 × 100 = 15.75% [2]. (b) Reserves rise by 210,000 - 90,000 = 120,000 [1]; ROCE = 63,000 ÷ 520,000 × 100 = 12.12% [1]. (c) The property is shown at an old, lower price [1], so a business that bought recently shows higher capital employed and a lower ROCE even if performance is the same [1]. [6] Examiner insight: Showing capital employed makes your method visible; “historic cost is out of date” alone is weaker than an answer linked to ROCE.

8. (a) Straight line = 48,000 ÷ 4 = 12,000 [1]; reducing balance = 48,000 × 40% = 19,200 [1]. (b) Straight line profit = 90,000 - 12,000 = 78,000, so 78,000 ÷ 600,000 × 100 = 13.00% [1]. Reducing balance profit = 70,800, so 11.80% [1]. (c) Same machine and same year, but profit differs by 7,200 [1], so two businesses using different methods can look unequal when they are not [1]. [6] Examiner insight: A difference in profit alone is not the point; the answer should say why the comparison with another business is affected.

9. (i) A skilled workforce can improve quality and customer service [1] but skill is not measured in money, so it is not in the statements [1]. (ii) A busy location can bring regular customers, or a move or road closure can lose them [1], which statements do not show [1]. (iii) A recession can reduce spending on printing, or high interest rates raise costs [1], and the statements show past results only [1]. [6] Examiner insight: Give each aspect its own effect on the business; one sentence repeated three times is unlikely to cover all three.

10. Stanmoor has the higher ROCE [1] and profit margin [1], so it earns more on capital and per dollar of sales. Its current ratio of 2.4 : 1 suggests liquidity, against 0.8 : 1 at Nettlefold [1], and customers take 20 days to pay on average, against 55 [1]. A shareholder in Nettlefold may bear more risk because the loan has to be repaid and interest paid before profit reaches owners [1]. But Nettlefold’s loan lowers its ROCE, and other factors may explain the gap, such as size or type of goods [1]. The ratios come from historic cost figures, which may undervalue assets [1], and different accounting policies could also affect profit [1]. One year may be unusual, and workforce skill or location is not shown [1]. Overall, Stanmoor looks the stronger investment on these figures, but the investor should check more years and the non-financial aspects first [1]. [10] Examiner insight: Evaluation marks tend to go to answers that reach a judgement and give a reason for caution; a list of ratios without a conclusion usually leaves them unclaimed.

Where marks are usually lost

• Writing a ratio as a bare number when the syllabus wants a ratio such as 1.30 : 1.
• Using profit for the year instead of profit before interest in ROCE.
• Naming a problem of comparison without saying how it changes the ratios.
• Giving a party’s name but no decision.
• Calling historic cost “inaccurate” instead of saying it shows past cost.
• Giving a non-financial aspect with no effect on the business.
• Ending an evaluation without a judgement.

Next steps

• Re-read the study guide.
• Condense with the revision notes.
• Return to the IGCSE Accounting hub and the checklist.
• Try all free 10-minute diagnostics.
• Book a free trial class at /trial/.

Frequently asked questions

How should you answer a question about an interested party? Name the party, the decision it makes and the figure it uses, for example a bank using the acid test to decide whether to lend. Naming a party with no decision earns no mark.

Is historic cost inaccurate? Historic cost is not inaccurate; it shows the price paid in the past rather than current value. Explain that difference rather than calling the figure wrong.

How should an evaluation of inter-business comparison end? End with a judgement on what the ratios suggest, plus at least one limit on the comparison, such as different accounting policies or year ends. An evaluation without a judgement loses marks in Cambridge IGCSE Accounting (0452).

How do you explain a problem of comparison? Say how the problem changes the ratios, for example that different year ends mean seasonal inventory and receivables differ. Naming the problem alone is not enough.

Official syllabus

Cambridge International Education, Cambridge IGCSE Accounting 0452 syllabus for 2027, 2028 and 2029 (version 1), sections 6.3 to 6.5.