What this practice covers
These questions are drawn from past CIE 9706 Accounting papers and filtered to profitability ratios. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
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What examiners see students get wrong here
These are the errors that cost marks on profitability ratios, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Using profit after interest in ROCE while including the loan in capital employed.
- Confusing mark-up with margin. Mark-up is on cost, margin is on revenue.
- Saying gross margin fell "because costs rose" without saying which costs. Expenses do not affect gross margin at all.
- Quoting the ratio again as the explanation of the ratio.
- Comparing ROCE across different industries and drawing a conclusion.
- Recommending "cut costs" with no specific cost and no consequence.
- Forgetting that a percentage can rise while the money profit falls, if revenue fell further.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Profitability ratios revision notes.