OCR A Level Business: Measures of performance: financial and non-financial (H431) – 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 the Measures of performance: financial and non-financial content point of the OCR A Level Business H431 specification (Version 2.1, January 2026; final assessment summer 2027). All businesses and figures are invented. Ratios use the standard forms set out in the study guide; the revision notes give a quick summary. See also the OCR A Level Business hub, the printable checklist, and the wider unit practice set.

Questions

1. Distinguish between a financial and a non-financial measure of business performance, giving one example of each. [3]

2. Stoneby Print Ltd has sales revenue of £620,000, cost of sales of £387,500, operating expenses of £170,500 and finance costs of £8,000. Last year its gross profit margin was 40.0% and its net profit margin 9.5%.

(a) Calculate the gross profit margin and the net profit margin. [2] (b) Analyse what the changes since last year suggest. [2]

3. Stoneby’s current assets are inventory £96,000, receivables £54,000 and cash £18,000. Its current liabilities are £84,000.

(a) Calculate the current ratio and the acid test. [2] (b) Explain why the two figures differ and what the acid test suggests. [3]

4. Stoneby wins a £45,000 order on 60 days’ credit. The materials cost £30,000 and are paid for at once. Explain why the order raises profit but can create a cash-flow problem. [4]

5. Glenroe Coaches budgeted monthly sales revenue of £96,000, fuel of £22,000, driver wages of £30,000, maintenance of £9,000 and other costs of £10,000. Actual figures were £90,000, £26,400, £28,500, £12,600 and £10,000.

(a) Calculate the variance for sales revenue, fuel, maintenance and operating profit, stating whether each is favourable or adverse. [4] (b) Analyse one possible cause of the fuel variance and suggest one action. [3]

6. Glenroe has capital employed of £800,000, of which £360,000 is non-current liabilities. Its operating profit is £72,000 and its finance costs are £36,000.

(a) Calculate gearing and interest cover. [2] (b) Explain what these figures mean for a bank deciding whether to lend more. [3]

7. Classify each ratio as a measure of liquidity, profitability or efficiency: stock turnover, return on capital employed, acid test. [3]

8. Analyse two reasons why Stoneby’s published accounts do not give a complete picture of its performance. [4]

9. Stoneby’s presses produced 18,000 jobs last month; maximum capacity is 24,000 jobs.

(a) Calculate capacity utilisation. [2] (b) Explain one reason why customer satisfaction scores are a useful non-financial measure. [3]

10. Hartwith Garden Centres reports the following.

	Last year	This year
Sales revenue	£2,400,000	£2,640,000
Operating profit	£168,000	£132,000
Capital employed	£1,200,000	£1,320,000
Non-current liabilities	£360,000	£528,000
Market share	8%	7%
Customer satisfaction	88%	81%
Staff turnover	12%	22%

Evaluate whether Hartwith’s performance has improved, from the point of view of its shareholders. [10]

11. Evaluate whether measuring performance is worthwhile for a small business such as Glenroe Coaches. [6]

12. Glenroe’s return on capital employed is 9.0%, its interest cover is 2.0 times, emissions per passenger-kilometre rose 12% and staff turnover rose from 15% to 25%. Evaluate the importance of these measures to (i) its bank and (ii) its employees. [8]

Answers

1. A financial measure is expressed in money terms or derived from the accounts [1]; a non-financial measure describes performance in other units, such as percentages or counts [1]. Examples: net profit (financial) and customer satisfaction score (non-financial) [1]. [3] Examiner insight: Answers tend to gain credit when the definition is about the type of measure, not just two examples listed with no distinction.

2. (a) Gross profit = 620,000 - 387,500 = £232,500, so gross margin = 37.5% [1]. Operating profit = 232,500 - 170,500 = £62,000; net profit = 62,000 - 8,000 = £54,000, so net margin = 8.7% [1]. (b) Gross margin fell 2.5 points but net margin only 0.8 points [1], which suggests cost of sales is the main pressure while overheads and interest have been better controlled relative to revenue [1]. [4] Examiner insight: Comparing the size of the two falls is the analytical step; stating that both ratios “went down” earns little beyond the calculation.

3. (a) Current assets = 96,000 + 54,000 + 18,000 = £168,000, so current ratio = 168,000 / 84,000 = 2.0 [1]. Acid test = (168,000 - 96,000) / 84,000 = 0.86 [1]. (b) The acid test excludes inventory [1], which may be slow to convert into cash [1]. At 0.86, liquid assets do not fully cover current liabilities, so Stoneby depends on selling inventory or on customers paying to meet its debts [1]. [5] Examiner insight: A reason for excluding inventory should be given; quoting a figure below 1 without saying what it implies leaves the interpretation incomplete.

4. Profit on the order is 45,000 - 30,000 = £15,000, recorded when the sale is made [1]. The £30,000 materials cost leaves the bank immediately [1], while the £45,000 arrives only after 60 days, so cash flow is -£30,000 in the meantime [1]. Stoneby may be unable to pay wages or suppliers and need an overdraft or loan, with interest costs [1]. [4] Examiner insight: The timing gap must be stated explicitly; saying “profit is not cash” without using the order’s figures tends to stay descriptive.

5. (a) Sales revenue: £6,000 adverse [1]. Fuel: £4,400 adverse [1]. Maintenance: £3,600 adverse [1]. Budgeted operating profit = 96,000 - 22,000 - 30,000 - 9,000 - 10,000 = £25,000; actual = 90,000 - 26,400 - 28,500 - 12,600 - 10,000 = £12,500, so variance £12,500 adverse [1]. (b) Fuel is 20% over budget although revenue is lower [1], so a likely cause is a rise in fuel prices rather than more journeys [1]. Action: agree a fixed-price fuel contract or review routes to cut mileage [1]. [7] Examiner insight: Labelling each variance favourable or adverse is usually required alongside the amount; a cause should fit the other data given, here lower revenue.

6. (a) Gearing = 360,000 / 800,000 = 45% [1]. Interest cover = 72,000 / 36,000 = 2.0 times [1]. (b) Nearly half of capital employed is long-term borrowing [1], and profit covers interest only twice, so a modest fall in profit could threaten repayments [1]. The bank might therefore refuse, or lend only with security or a higher rate, though the answer depends on cash flow and the trend [1]. [5] Examiner insight: Strong answers read both ratios together and say what the lender’s decision depends on, instead of calling high gearing simply bad.

7. Stock turnover is efficiency [1]; ROCE is profitability [1]; acid test is liquidity [1]. [3] Examiner insight: One correct group per ratio is the whole task here; mixing liquidity with profitability is a common slip.

8. Published accounts are historic [1], so they say little about future performance or about a rise in costs that has not yet happened [1]. They leave out non-financial matters such as quality, customer loyalty and staff morale [1], which can affect future sales even when current profit looks healthy [1]. [4] Examiner insight: Each reason needs a consequence for the business; naming two limits with no development tends to stop at identification.

9. (a) Capacity utilisation = 18,000 / 24,000 x 100 = 75% [2]. (b) Low satisfaction often appears before sales fall [1], so it warns Stoneby early about quality or service problems [1], which profit alone would not reveal until later [1]. [5] Examiner insight: The method for a utilisation figure is worth showing; the usefulness point needs a reason, not just “it shows customers are happy”.

10. ROCE fell from 14.0% to 10.0% [1] and operating margin from 7.0% to 5.0% [1]. Revenue rose 10.0% but operating profit fell 21.4% [1]. Gearing rose from 30.0% to 40.0% [1], so shareholders carry more financial risk. Market share fell from 8% to 7% despite revenue growth, meaning rivals grew faster [1]. Satisfaction fell from 88% to 81% and staff turnover rose from 12% to 22% [1], which may harm future sales and raise costs. In favour of improvement, revenue growth shows demand is rising [1]. However, it was bought at the expense of returns [1]. Judgement: performance has worsened for shareholders [1], because return on their capital, risk and the leading indicators have all moved the wrong way; the verdict would change only if the fall in profit proved a one-off investment cost [1]. [10] Examiner insight: An evaluative answer usually weighs growth against profitability and ends with a clear verdict and a condition; listing the figures alone stays at the lower end.

11. Advantages: it shows whether objectives are met [1] and gives early warning of problems such as rising costs, allowing quick action [1]. Disadvantages: collecting data takes time and money a small firm may lack [1], and managers may chase easy-to-count targets and ignore wider performance [1]. Judgement: worthwhile if the measures are few, linked to objectives and simple, such as cash flow and fuel variance [1]; it is less so if they distract from running the service [1]. [6] Examiner insight: A conclusion that states what the judgement depends on, such as the cost of the system, is more convincing than “it depends” alone.

12. (i) Bank: a 9.0% ROCE and interest cover of 2.0 show thin profit relative to borrowing [1], so repayment risk is the key worry [1]. Emissions and staff turnover matter less directly, though fines or a loss of contracts could hit profit [1]. (ii) Employees: staff turnover rising from 15% to 25% suggests dissatisfaction or insecurity [1], and a low ROCE could mean pressure on pay or jobs [1]; emissions matter if they affect working conditions or the firm’s reputation [1]. Judgement: the bank’s measures are more immediately decisive, because without profit cover the business may not survive [1]; but staff turnover is a leading indicator that could damage service and profit later, so management should address both [1]. [8] Examiner insight: Each stakeholder needs its own measures linked to its interests, then a ranked judgement; writing about “stakeholders” in general gains little.

Where marks are usually lost

• Calculating a ratio but not writing the formula or units.
• Stating that a figure “increased” with no reason or consequence.
• Mixing up liquidity, profitability and efficiency.
• Labelling a lower-than-budget cost as adverse.
• Treating profit and cash flow as the same.
• Using only financial data when the question asks for non-financial measures too.
• Ignoring the stakeholder named in the question.
• Finishing an evaluate or justify answer without a judgement.
• Calling gearing “bad” with no reference to profit or interest cover.

Frequently asked questions

Are these OCR A Level Business H431 past paper questions? No. They are twelve original practice questions written for Marlbridge on the content point Measures of performance: financial and non-financial. Use them alongside OCR’s own past papers.

Is a cost below budget favourable or adverse? Favourable. A variance is favourable when it raises profit, so lower-than-budget costs are favourable; label each variance alongside its amount and give a cause that fits the other data.

Is high gearing always bad? No. Read gearing together with profit and interest cover, and say what a lender’s decision depends on. Calling high gearing simply “bad” earns little.

How do you analyse a ratio that has changed? Compare the size of the changes and give a cause or consequence, rather than stating that a figure “went up” or “went down”. Write the formula and units as well.

How do you answer a question that names several stakeholders? Link each stakeholder to the measures that match its interests, such as liquidity for a bank, then give a ranked judgement. Writing about “stakeholders” in general earns less.

Next steps

• Re-read the study guide and the revision notes.
• Go to the OCR A Level Business hub and the printable checklist.
• Take the free 10-minute diagnostics to find weak spots.
• Book a free trial class.

Official syllabus

OCR Level 3 Advanced GCE in Business (H431), Version 2.1 (January 2026), OCR; section Measures of Performance: financial and non-financial, Business objectives and strategy.