Lesson 3.5.2.2

3.5.2.2 Profitability ratios and timings of cash flows Quiz: AQA Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.5.2.2, Profitability ratios and timings of cash flows: 20 multiple choice questions for the AQA Business (7132), Unit 5: Financial management, written with Revision Ninja.

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The 20 questions

  1. Gross profit margin is calculated as:

    • Gross profit divided by revenue, multiplied by 100
    • Operating profit divided by revenue, multiplied by 100
    • Revenue divided by gross profit, multiplied by 100
    • Gross profit divided by total costs, multiplied by 100

  2. Profit from operations margin is:

    • Gross profit divided by cost of sales, expressed as a percentage
    • Profit for the year divided by revenue, expressed as a percentage
    • Cash balance divided by revenue, expressed as a percentage
    • Operating profit divided by revenue, expressed as a percentage

  3. Receivables are:

    • Money borrowed from banks on a long-term basis
    • Amounts owed to the business by customers for goods or services already supplied
    • Money held in the business's bank account
    • Amounts the business owes to suppliers for goods already received

  4. Payables are:

    • Amounts owed to the business by customers who have paid late
    • Amounts the business owes to suppliers for goods or services already received
    • Profits paid out to shareholders as dividends
    • Shares held by employees in the business

  5. Receivables days measure:

    • The average number of days taken to collect payment from customers after a sale
    • The number of days a business takes to pay its staff each month
    • The number of days a product spends in inventory before sale
    • The average number of days taken to pay suppliers after receiving goods

  6. Payables days measure:

    • The average number of days the business takes to pay its suppliers
    • The average number of days customers take to pay the business
    • The average number of days a machine is out of use
    • The number of days in a year when the business has no cash

  7. Which profit margin is most affected by changes in the cost of sales?

    • Return on capital employed
    • Profit for the year margin
    • Profit from operations margin
    • Gross profit margin

  8. A business has revenue of 500,000 and gross profit of 175,000. What is its gross profit margin?

    • 28.6%
    • 350%
    • 65%
    • 35%

  9. A business has revenue of 2,000,000 and operating profit of 240,000. What is its profit from operations margin?

    • 120%
    • 12%
    • 8%
    • 16%

  10. A business has revenue of 900,000 and profit for the year of 45,000. What is its profit for the year margin?

    • 50%
    • 20%
    • 0.5%
    • 5%

  11. A business has trade receivables of 120,000 and annual credit sales of 1,095,000. What are its receivables days?

    • 91 days
    • 30 days
    • 40 days
    • 50 days

  12. A business has trade payables of 60,000 and annual purchases of 438,000. What are its payables days?

    • 60 days
    • 73 days
    • 50 days
    • 45 days

  13. A business's receivables days rise from 30 to 55, while its payables days stay at 40. What is the most likely consequence?

    • Payables days increase cash, so liquidity is unaffected
    • Cash is tied up for longer, so the business may face a cash shortage even if it is profitable
    • Cash flow improves because customers are paying more slowly
    • Profit margins rise as customers pay late

  14. A firm pays its suppliers in 30 days but its customers take 60 days to pay. What is the cash implication?

    • The firm must finance the gap between paying suppliers and collecting from customers
    • There is no impact on cash because both are short-term
    • The firm collects cash before it pays, creating a surplus
    • The firm's profit increases automatically by the gap in days

  15. Firm A has a gross profit margin of 40% and firm B has 25%. Which conclusion is best supported?

    • Firm A keeps more of each pound of revenue after cost of sales
    • Firm A has zero operating expenses
    • Firm B is more profitable because its margin is lower
    • Both firms earn exactly the same profit

  16. Evaluate: what is the strongest argument for analysing receivables days alongside profit margins?

    • A profitable business can still face cash problems if customers pay slowly, so timing and margins must be analysed together
    • Receivables days show profit margins directly and so are unnecessary
    • Profit margins already capture every aspect of cash timing
    • Receivables days only matter to banks, not to managers

  17. A business has annual credit sales of 1,460,000 and receivables days of 45. What is its trade receivables balance?

    • 180,000
    • 45,000
    • 240,000
    • 120,000

  18. A business's payables fall from 120,000 to 80,000 as it pays suppliers sooner. What is the effect on cash?

    • Cash rises by 40,000 because the business keeps more money
    • Cash rises by 80,000 because all payables are removed
    • Cash falls by 40,000 as the business pays suppliers sooner
    • Cash is unchanged because payables are not cash

  19. A business has revenue of 3,000,000, a gross profit margin of 30% and operating expenses of 600,000. What is its profit from operations margin?

    • 10%
    • 600%
    • 30%
    • 20%

  20. Evaluate: why might a business with a strong gross profit margin still have a weak profit for the year?

    • Profit for the year always exceeds gross profit
    • High operating expenses, interest or tax can absorb the gross profit, leaving little profit for the year
    • Gross profit includes all expenses, so profit for the year cannot be weaker
    • Gross profit margin ignores revenue so is unreliable

All AQA Business quizzes