Lesson 3.5.1

3.5.1 Interpreting financial statements Quiz: Pearson Edexcel Business, Unit 3

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.5.1, Interpreting financial statements: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 3: Business decisions and strategy, written with Revision Ninja.

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The 20 questions

  1. What key information is recorded on a statement of comprehensive income?

    • Share capital
    • Revenue and profit
    • Total assets
    • Cash inflows

  2. What does a statement of financial position show at a specific point in time?

    • Assets and liabilities
    • Revenue and expenses
    • Cash flow totals
    • Profits and dividends

  3. Which calculation gives gross profit on a statement of comprehensive income?

    • Revenue minus total expenses
    • Gross margin times revenue
    • Operating profit plus tax
    • Revenue minus direct costs

  4. According to the balance sheet identity, total assets must equal which of the following?

    • Liabilities plus equity
    • Current assets only
    • Liabilities minus equity
    • Revenue plus profit

  5. Within what timeframe is a current asset expected to be converted into cash?

    • After two years
    • Within ten years
    • Within five years
    • Within one year

  6. Which stakeholder group is primarily interested in a business's profit performance on the income statement?

    • Raw material suppliers
    • Shareholders
    • Local council members
    • Trade union officials

  7. When are non-current liabilities due to be repaid by a business?

    • After one year
    • Immediately on demand
    • Within twelve months
    • Within 30 days

  8. A firm has revenue of 500,000 pounds and cost of sales of 300,000 pounds. What is its gross profit?

    • 200,000 pounds
    • 300,000 pounds
    • 800,000 pounds
    • 100,000 pounds

  9. A firm has total assets of 800,000 pounds and total liabilities of 500,000 pounds. What is its equity?

    • 300,000 pounds
    • 800,000 pounds
    • 500,000 pounds
    • 1,300,000 pounds

  10. A firm has revenue of 1,000,000 pounds, cost of sales of 550,000 pounds and operating expenses of 250,000 pounds. What is its operating profit?

    • 700,000 pounds
    • 450,000 pounds
    • 300,000 pounds
    • 200,000 pounds

  11. Operating profit is 200,000 pounds and interest payments are 20,000 pounds. What is profit before tax?

    • 200,000 pounds
    • 20,000 pounds
    • 180,000 pounds
    • 220,000 pounds

  12. Profit before tax is 180,000 pounds and corporation tax is charged at 25%. What is profit after tax?

    • 155,000 pounds
    • 180,000 pounds
    • 135,000 pounds
    • 45,000 pounds

  13. Which stakeholder group is most interested in the interest expenses shown on an income statement?

    • Local community groups
    • Customers and consumers
    • Lenders and banks
    • Factory shopfloor workers

  14. Retained profit from the income statement appears on the balance sheet as part of:

    • Revenue
    • Non-current liabilities
    • Current assets only
    • Equity

  15. What common operational factor causes a profitable business to suffer cash shortages?

    • Instant customer payments
    • Zero trade credit taken
    • Excess cash reserves
    • Cash tied in inventory

  16. Which stakeholder group focuses most closely on the total liabilities on a statement of financial position?

    • Local resident groups
    • Junior employees
    • Retail customers
    • Creditors and lenders

  17. What is a major limitation of published financial statements for assessing business performance?

    • Updated every second
    • Ignores total revenue
    • Excludes tax obligations
    • Uses historical data

  18. A firm holding high non-current assets but very low current assets faces which primary risk?

    • High gearing ratio
    • Low operating costs
    • Excessive tax liability
    • Poor short-term liquidity

  19. If a firm's profits fall while its dividend payments increase, what happens to retained profit?

    • It stays constant
    • It increases
    • It doubles
    • It decreases

  20. Which of the following is classified as a current liability on a balance sheet?

    • Share capital
    • Trade receivables
    • Bank loan
    • Bank overdraft

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