FINANCIAL RATIOS EXAM PRACTICE PAPER 2 –
ACCOUNTING & FINANCE | RATIO ANALYSIS (STANDARD
LEVEL) | 40 EXAM QUESTIONS WITH FULLY WORKED
ANSWERS, STEP-BY-STEP CALCULATIONS & DETAILED
RATIONALE | REVISION & EXAM PREPARATION
RESOURCE
COURSE NAME
Accounting and Finance – Financial Statement Analysis (Ratio Analysis Focus)
LEVEL
College / First-Year University (Standard Level)
SHORT INTRODUCTION
This Financial Ratios Paper 2 is designed to build on foundation knowledge and
develop stronger analytical and calculation skills in ratio analysis. It covers
liquidity, profitability, efficiency, and interpretation-based questions using real
exam-style scenarios.
Ideal for revision, test preparation, and improving exam performance.
INSTRUCTIONS
• Answer ALL questions
• Show full working for calculations
• Use correct formulae
• Time allowed: 2 hours
• All questions carry equal marks unless stated
, PAPER 2 – FINANCIAL RATIOS (STANDARD LEVEL)
40 QUESTIONS WITH ANSWERS AND DETAILED RATIONALE
SECTION A: CONCEPT & INTERPRETATION (1–25)
1. A ratio above industry average usually indicates:
A. Weak performance
B. Strong performance
C. No performance
D. Loss
Answer: B
Rationale: It shows the business is performing better than competitors.
2. A declining current ratio suggests:
A. Improved liquidity
B. Reduced liquidity
C. Increased profit
D. Higher sales
Answer: B
Rationale: Fewer current assets relative to liabilities reduces liquidity.
3. Acid test ratio is also called:
A. Quick ratio
B. Profit ratio
C. Efficiency ratio
D. Debt ratio
Answer: A
Rationale: It measures immediate liquidity without inventory.
4. Which is the most liquid asset?
A. Inventory
B. Cash
ACCOUNTING & FINANCE | RATIO ANALYSIS (STANDARD
LEVEL) | 40 EXAM QUESTIONS WITH FULLY WORKED
ANSWERS, STEP-BY-STEP CALCULATIONS & DETAILED
RATIONALE | REVISION & EXAM PREPARATION
RESOURCE
COURSE NAME
Accounting and Finance – Financial Statement Analysis (Ratio Analysis Focus)
LEVEL
College / First-Year University (Standard Level)
SHORT INTRODUCTION
This Financial Ratios Paper 2 is designed to build on foundation knowledge and
develop stronger analytical and calculation skills in ratio analysis. It covers
liquidity, profitability, efficiency, and interpretation-based questions using real
exam-style scenarios.
Ideal for revision, test preparation, and improving exam performance.
INSTRUCTIONS
• Answer ALL questions
• Show full working for calculations
• Use correct formulae
• Time allowed: 2 hours
• All questions carry equal marks unless stated
, PAPER 2 – FINANCIAL RATIOS (STANDARD LEVEL)
40 QUESTIONS WITH ANSWERS AND DETAILED RATIONALE
SECTION A: CONCEPT & INTERPRETATION (1–25)
1. A ratio above industry average usually indicates:
A. Weak performance
B. Strong performance
C. No performance
D. Loss
Answer: B
Rationale: It shows the business is performing better than competitors.
2. A declining current ratio suggests:
A. Improved liquidity
B. Reduced liquidity
C. Increased profit
D. Higher sales
Answer: B
Rationale: Fewer current assets relative to liabilities reduces liquidity.
3. Acid test ratio is also called:
A. Quick ratio
B. Profit ratio
C. Efficiency ratio
D. Debt ratio
Answer: A
Rationale: It measures immediate liquidity without inventory.
4. Which is the most liquid asset?
A. Inventory
B. Cash
