O-LevelAccountingAnalysis and interpretation7707/12 · May/June 2020 · Q311 Mark

The following ratios have been calculated for a trader. year 1 year 2 profit margin 15% 20% return on capital employed (ROCE) 9% 6% What explains these changes?

ADrawings have increased by more than profit for the year.

BGross profit has increased but profit for the year has decreased.

CProfit for the year has increased and capital has been introduced.

DProfit for the year has increased and a long-term loan has been repaid.

✓ Correct answer

C: Profit for the year has increased and capital has been introduced.

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Topic: Analysis and interpretation, O-Level Accounting (syllabus 7707). Multiple choice, 1 mark.
Source: O-Level Accounting, May/June 2020 Paper 1 Variant 2, question 31.

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