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Subjects · Leaving Cert Accounting

Leaving Cert Accounting: Ratios — interpretation

How often Ratios — interpretation comes up on the Accounting papers, every year it was asked, and questions to try.

HL Asked on 10 of the last 10 Higher Level papers, most recently in 2026. banker

OL Asked on 10 of the last 10 Ordinary Level papers, most recently in 2026. banker

Ratios — interpretation, Higher Level(6 marks)

Quick ones on Ratios — interpretation.

(a)Which of these is a liquidity ratio?
  1. Return on capital employed
  2. Acid test ratio
  3. Price-earnings ratio
(b)A falling gross margin could be caused by…
  1. A reduction in rent
  2. Lower purchase prices
  3. Cutting selling prices
(c)Which user of accounts focuses most on the ability to repay a loan?
  1. A bank or lender
  2. A customer
  3. An employee
Show the answers

(a) Acid test ratio

(b) Cutting selling prices

(c) A bank or lender

Your turn: Higher Level questions on Ratios — interpretation.

Higher Level

Asked on 10 of the last 10 Higher Level papers, most recently in 2026. banker

Every paper, year by year

YearWhere it came up
2026Q5
2025Q5
2024Q5
2023Q5
2022Q5
2021Q5
2019Q5
2018Q5
2017Q5
2016Q5

Links open the State Examinations Commission’s paper for that year.

More Ratios — interpretation questions

Ratios — interpretation, 2 marks

Overtrading means…

  1. Holding too much idle cash in the bank account
  2. Selling goods below their cost price
  3. Expanding sales without enough working capital
Show the answer

Expanding sales without enough working capital

Rapid growth ties cash up in stock and debtors, so the firm may be unable to pay creditors despite rising sales.

Ordinary Level

Asked on 10 of the last 10 Ordinary Level papers, most recently in 2026. banker

Every paper, year by year

YearWhere it came up
2026Q5
2025Q5
2024Q5
2023Q5
2022Q5
2021Q5
2019Q5
2018Q5
2017Q5
2016Q5

Links open the State Examinations Commission’s paper for that year.

More Ratios — interpretation questions

Ratios — interpretation, 2 marks

A shareholder is mainly interested in a company's…

  1. Stock levels and stock control
  2. Number of staff employed
  3. Profitability and dividends
Show the answer

Profitability and dividends

Shareholders own the company, so they look at profit, return on capital employed and the dividends paid to them.

Ratios — interpretation, 2 marks

Mark-up has fallen. A possible reason is…

  1. Wages rose sharply during the year
  2. Buying prices rose but selling prices stayed the same
  3. Selling prices were increased while costs stayed the same
Show the answer

Buying prices rose but selling prices stayed the same

Mark-up = gross profit ÷ cost of sales. Dearer goods with unchanged prices shrink gross profit. Wages are below gross profit.

Ratios — interpretation, 2 marks

ROCE is 12% and banks pay 3% on deposits. This suggests…

  1. The business earns a better return than a deposit account
  2. The owners should close it and put the money on deposit
  3. The business made a loss
Show the answer

The business earns a better return than a deposit account

12% is well above the 3% risk-free return, so money invested in the business is being used well.

Other Accounting topics

All of Leaving Cert Accounting