Question detail
CycleNest serves price-sensitive customers while using retained profit; the case evidence includes break-even output of ?2,922, sales of 772 units, and a 33% change in costs or demand. Which option best applies Interpret profitability ratios to support judgements about business performance?
Try the question, check the answer, then read the explanation to understand the curriculum point.
At a glance
MCQ
Type
practice
Style
Topic
Analysing the financial performance of a business
Question
- A. Use profitability ratios to judge supplier lead time, owners impact, and the business objective in Profitability ratios.
- B. Give only a definition of Analysing the financial performance of a business without using the case evidence.
- C. Treat fixed and variable costs as identical and ignore the effect on owners.
- D. Choose the largest sales figure without checking costs, finance, or context.
Answer
The correct option is: Use profitability ratios to judge supplier lead time, owners impact, and the business objective in Profitability ratios.
Explanation
This option works because Use profitability ratios to judge supplier lead time, owners impact, and the business objective in Profitability ratios. The case evidence gives ?4,422, 772 units, and 33%, so the answer must explain the commercial effect rather than repeat a definition. The distractors are weaker because they confuse fixed and variable costs, miss the owners, or ignore the business objective.
Common mistake
Profitability ratios common mistake 1
Giving a vague answer instead of directly addressing: Interpret profitability ratios to support judgements about business performance..
Answer by clearly explaining how to interpret profitability ratios to support judgements about business performance..
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