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Cambridge IGCSE Accounting practice

What does the Profit Margin ratio measure?

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Show answerCalculation and understanding of accounting ratios revisionRevise the key idea

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MCQ

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cambridge_mcq

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Calculation and understanding of accounting ratios

Exam-style question

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What does the Profit Margin ratio measure?.

  1. A.The percentage of revenue that exceeds the cost of goods sold
  2. B.The percentage of revenue that remains as profit after all expenses
  3. C.The efficiency of capital usage in generating profits
  4. D.The ability to pay short-term obligations

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Paper 2 structured question: Calculation and understanding of accounting ratios

Paper 2Structured Written Paper4 marks

Data Table

Company Financial Data

DescriptionValue
Revenue$500,000
Cost of Goods Sold$300,000
Net Profit$50,000
Current Assets$200,000
Current Liabilities$100,000
Inventory$50,000
  1. a

    Calculate the Gross Margin ratio.

    Aim for approximately 2 distinct marking points.

    [2]
  2. b

    Calculate the Current Ratio.

    Aim for approximately 2 distinct marking points.

    [2]