Grade 11 · CAPS

Grade 11 Analysis and Interpretation of Financial Statements

Accounting practice questions and a worked example

Grade 11 Accounting questions on analysing and interpreting financial statements give you extracts from a partnership’s statements and a table of financial indicators for two years. You calculate indicators such as the acid-test ratio, the debt-equity ratio and the return on partners’ equity, then comment on liquidity, risk and returns with figures and trends. They come from the Eastern Cape Department of Education’s Grade 11 November papers for 2023, 2024 and 2025, each with the answer from the marking guideline.

Worked example

QUESTION 4: FINANCIAL INDICATORS AND INTERPRETATION OF FINANCIAL STATEMENTS You are provided with the information of Yoyo Partners for the financial year ended 28 February 2023. NOTE: Provide figures, trends, financial indicators or calculations in EACH case to support your comments and explanations. 4.2 Explain whether the business is managing its expenses effectively. Identify TWO financial indicators (with figures) to support your explanation.

Answer

• % operating expenses on sales decreased/improved (from 29%) to 25%. • % net profit on sales increased/improved (from 13%) to 17,5%. The business is managing expenses well. A decrease in operating expenses and an improvement in sales contributed to a significant increase in net profit.

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Analysis and Interpretation of Financial Statements

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Common mistakes

Quoting an indicator without the trend. The marking guideline gives marks for the indicator, the figures and the comment: the debt-equity ratio increased from 0,3 : 1 to 0,7 : 1, so the business is now high risk.
Judging a return without a comparison. The return of 27,1% is compared with the 8,5% interest on a fixed deposit to earn full marks.
Using year-end equity instead of the average. Return on equity divides net profit by half of opening plus closing equity: 629 025 ÷ ½ (2 670 000 + 1 970 000) = 27,1%.

Analysis and Interpretation of Financial Statements in other grades

Grade 12 Analysis and Interpretation of Financial Statements

Aligned to CAPS Grade 11 Accounting — Analysis and Interpretation of Financial Statements. Curriculum source: CAPS for the FET Phase, Department of Basic Education.