Cambridge 0452 and 0985 · Sub-topic 6.2
Interpretation of accounting ratios
The 4 skills the syllabus asks for, the slips that cost marks, and how our teachers explain it.
What students must be able to do
- Compare ratios across different years and comment on the movement.
- Say what each ratio shows about profitability, liquidity and working capital, and suggest ways to improve them.
- Explain how inventory valuation, sales volume, selling prices, other income and expenses change gross profit and profit.
- From 2027: explain why cash and profit differ.
Official wording: Cambridge IGCSE Accounting 0452: syllabus for 2027-2029 (Version 1), page 18; Cambridge IGCSE Accounting 0452: syllabus for examination in 2026 (Version 2, December 2025), page 17. See all sources.
How our teachers teach it
This is where evaluation marks live, and the figures are already given by 6.1. Our teachers teach a three-part comment: state the movement, give a reason grounded in the figures, and make a recommendation that would change the ratio. For example, a current ratio that rises from 1.2 to 1.8 looks safer, but ask whether slow-moving inventory caused the rise. One such sentence per ratio puts a student ahead of scripts that only repeat numbers.
If any of these slips sound familiar, we can help. A teacher can mark your child's answers on interpretation of accounting ratios line by line and show where the marks go. Book a trial class.
How the wording changed for 2027
The 2027-2029 syllabus adds the reasons for the difference between cash and profit and widens improvement suggestions to include liquidity. The 2026 syllabus frames the gross and profit margin difference as an efficiency indicator.
Where it is examined
Interpretation of accounting ratios can appear in either paper, as a short question or as part of a longer task. Cambridge bases both papers on the whole syllabus. See the guides to Paper 1 and Paper 2 for the format.
Sources: Cambridge IGCSE Accounting 0452: syllabus for 2027-2029 (Version 1), pages 9, 22. See all sources.
Practise it
- Key terms: Working capital, Current ratio, Gross profit, Profit for the year
- Worked examples: ratio analysis
- Practice questions: ratios
- One-to-one Cambridge 0452 tuition
Other sub-topics in topic 6
Interpretation of accounting ratios: questions
How long should a comment be?
Does the 0985 (9 to 1) syllabus cover interpretation of accounting ratios too?
Which syllabus numbering should I use?
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