Page 296 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 5 Financial information and decisions

Revision checklist Exam practice questions

● The calculation of performance and 1 Two years ago Josep was made redundant from his job.
liquidity ratios helps stakeholders groups He decided to invest his $35,000 redundancy payment and
to interpret financial statements and assess $15,000 life savings into his own catering business. He used
the importance of these results in meeting the $50,000 to buy machinery and equipment, rent suitable
their own objectives.
premises and buy the inventories needed to set up the
● Although profit is the primary objective of business.
all private sector businesses, they must
not ignore the importance of liquidity to The table below shows an extract from Josep’s fi nancial
business survival. statements for the fi rst two years of trading.

Year 1 Year 2
$ $
Revenue 36,000 42,000

Profit 10,000 12,000
Return on capital employed ? 24%

a What is meant by ‘redundancy’? [2]
b Calculate the return on capital employed for Year 1. [2]
c Identify and explain two factors that might infl uence
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Josep’s revenue. [4]
d Identify and explain the usefulness of Josep’s fi nancial
data to any two of his businesses stakeholders. [6]

e Do you think Josep should be pleased with the
performance of his business during the fi rst two years?
Justify your answer. [6]

2 Figure 23.2 shows the gross profi t margin and the profi t
margin for three industries in Country Y.

100
91
90
80
70
Percentage 60 56 36
50
40
30
20
9
10 7 6
0
Farming Clothing Banking
manufacturing
Gross profit margin% Profit margin%
Figure 23.2 Bar chart of profit margins