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Edexcel IGCSE Business Studies 3.5 Accounts Analysis Questions

Practise accounts analysis by calculating ratios, interpreting trends and explaining why banks, owners or managers use accounts.

Syllabus
First assessment 2019
Course
Business Studies 4BS1

Exam points

  • Calculate ratios such as GPM, OPM, ROCE, current ratio or acid test from accounts.
  • Interpret financial information to assess performance, trends, routes or product decisions.
  • Explain why shareholders or banks use accounts when judging returns, risk or loans.

Covered syllabus points

3.5.1 Calculating and analysing accounting ratios3.5.2 Liquidity3.5.3 Use of financial documents

Question 1

[Maximum number: 3]

IKEA is a well-known home furniture retailer with stores throughout the world. It was started in 1943 by Ingvar Kamprad when he was given some money by his father for doing well at school. He wanted to produce furniture at a price that people could afford to buy.

He realised that transporting furniture to customers was difficult as goods were often damaged. He developed flat packs to avoid damage. A flat pack contained all the materials needed to self-assemble a table, a chair or a bed.

All IKEA stores are run as franchises.

Question (a)

(a)

An IKEA dining table costs IKEA 3800 SEK to make. The table sells for 4400 SEK.

Which one of the following is the correct markup?

Select one answer.

A

1.16%

B

13.64%

C

15.79%

D

115.79%

[ 1 ]

Question (b)

(b)

Figure 2 is an extract from IKEA's Statement of Income for 2020.

Figure 2

Figure 2

Calculate, to two decimal places, the gross profit margin for 2020. You are advised to show your working.

[ 2 ]

Question 2

[Maximum number: 10]

One of TADS' objectives is to expand by giving lessons for different musical instruments. To do this it will need to analyse its financial position.

Question (a)

(a)

Define the term liquidity.

[ 1 ]

Question (b)

(b)

TADS is looking to increase its revenue.
TADS is considering the following two options:
Option 1: teach other musical instruments
Option 2: increase the number of online drum lessons.

Justify which one of these two options TADS should choose.

[ 9 ]

Question 3

[Maximum number: 6]

In 1985 Emirates started its airline business with just two aircraft. It is now a well-known airline with over 265 aircraft flying to over 180 destinations around the world.

Emirates has won many awards for service and reliability. Until 2016 passengers rated Emirates the leading airline to travel with. However, in 2017 its rating dropped from first to fourth.

Analyse the likely benefits to Emirates of using financial information when making business decisions.

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