Lesson 5.9.1

5.9.1 Working capital Quiz: OCR Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 5.9.1, Working capital: 20 multiple choice questions for the OCR Business (H431), Unit 5: Accounting and finance, written with Revision Ninja.

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The 20 questions

  1. Which formula is used to calculate a business's working capital?

    • Revenue - total costs
    • Current assets + liabilities
    • Current assets - liabilities
    • Non-current assets - liabilities

  2. What time frame does the working capital cycle measure?

    • Loan repayment duration
    • Cash conversion time
    • Asset service life
    • Profit cycle duration

  3. A firm has current assets of £50,000 and current liabilities of £30,000. Calculate working capital.

    • £20,000
    • £15,000
    • £30,000
    • £80,000

  4. Which item is classified as a current asset on a statement of financial position?

    • Bank loans
    • Trade payables
    • Retained earnings
    • Trade receivables

  5. A business purchases stock on credit. Which statement of financial position item increases?

    • Trade payables
    • Retained earnings
    • Trade receivables
    • Share capital

  6. Which financial statement records revenue, costs, and profit over a specific trading period?

    • Sources of finance
    • Cash flow forecast
    • Balance sheet
    • Income statement

  7. If gross profit is £100,000 and operating expenses are £40,000, what is operating profit?

    • £60,000
    • £2.50
    • £140,000
    • £40,000

  8. Under straight-line depreciation, what happens to the annual depreciation charge over time?

    • Increases annually
    • Decreases annually
    • Fluctuates monthly
    • Remains constant

  9. What is the accounting term for customer debts that will never be collected?

    • Trade payables
    • Accruals
    • Bad debts
    • Current liabilities

  10. An asset costing £10,000 depreciates by 20% per year using straight-line. Annual charge?

    • £8,000
    • £1,600
    • £2,000
    • £500

  11. A £10,000 asset depreciates at 20% using reducing balance. Year two depreciation charge?

    • £6,400
    • £8,000
    • £1,600
    • £2,000

  12. Which statement of financial position entry shows total accumulated profits kept in the business?

    • Retained earnings
    • Non-current liabilities
    • Trade payables
    • Working capital

  13. A firm extends credit terms to customers from 30 to 60 days. Effect?

    • Reduces trade payables
    • Increases gross profit
    • Lengthens cash cycle
    • Shortens cash cycle

  14. Which item is classified as an intangible non-current asset?

    • Inventory
    • Trade receivables
    • Goodwill
    • Premises

  15. A business achieves revenue of £200,000 and cost of sales of £120,000. Gross profit?

    • £60,000
    • £120,000
    • £320,000
    • £80,000

  16. Which liquidity problem occurs when a business expands rapidly without adequate working capital?

    • Overcapitalisation
    • Insolvency margin
    • Overtrading
    • Under-depreciation

  17. Which financial obligation is classified as a non-current liability?

    • Bank overdraft
    • Five-year bank loan
    • Trade payables
    • Unpaid dividends

  18. Total assets are £150,000 and total liabilities are £60,000. Calculate net assets.

    • £90,000
    • £210,000
    • £150,000
    • £60,000

  19. How does issuing new shares for cash immediately impact a company's working capital?

    • Decreases working capital
    • Increases current liabilities
    • Increases working capital
    • No effect

  20. What is the primary purpose of a cash-flow forecast for a business?

    • Predict cash shortages
    • Determine tax liabilities
    • Calculate net profit
    • Value fixed assets

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