This question was a traditional interpretation question; part (a) required the calculation of specified ratios and part (b) required a comparative analysis of the financial performance they revealed.

The complication introduced in this question was that at the beginning of the current year (ended 31 March 2015) the company sold one of its divisions. The question gave four selected ratios for the year ended 31 March 2014 (which included the results of the division that had been sold) and then identified the division's separate profit or loss figures for that year.

Part (a)(i) required the recalculation of the given 2014 ratios after excluding the results of the sold division and (a)(ii) required the calculation of the equivalent ratios for the current year (2015). The purpose of this was that the ratios in (a)(i) and (a)(ii) would then be comparable.

The calculation of the ratios was disappointing, many candidates did not seem able to adjust properly for the effect of the sale of the division, in particular candidates failed to eliminate the carrying amount of the division when calculating the ROCE and net asset turnover for the adjusted ratios for 2014 (i.e. those for (a) (i)).

Another common error was the failure to exclude the profit on the sale of the division when calculating the operating profit margin for 2015, despite the question requirement specifically stating this.

Even some of the straightforward ratios, which are required knowledge at F3, were not calculated correctly and a significant number of candidates did not calculate the net asset turnover ratios at all.

The answers to part (b) were mixed; good answers correctly identified the effects of the disposal (overall a detrimental effect on the results and probably an unwise sale) and other important issues.

Those answers that merely reiterated in words the movements in the calculated ratios did not score highly. For example, merely saying that the return on capital employed has increased by x% without giving the breakdown of the increase between profit margins and asset utilisation (the secondary ratios) or suggestions as to what may have caused the changes, is not interpretation.

Many answers made no reference to the sale of the division at all and merely commented on the changes in the ratios. Another poor exam technique included the calculation of many ratios that were not asked for (usually liquidity ratios) and then to discuss these in fine detail.

It sometimes seems that candidates have prepared a specific approach to answering an interpretation question which they proceed to give, without focusing on what the question is actually asking for.

Very few candidates commented on the lack of wisdom in paying such a large dividend and the effect of paying off half of the loan notes and the bank overdraft.

It should be understood that where candidates made errors in the calculation of the ratios in part (a) and assessed the comparative performance accordingly, markers were instructed to mark such interpretation as being correct (assuming it was), even though it may have been different to that in the published answers. This is a form of the 'own figure' marking principle.