CBSE Class 12 Accountancy Accounting Ratios VBQs Set 02

Question. The ______ is a measure of liquidity which excludes ______, generally the least liquid asset. 
(a) current ratio, trade receivable
(b) liquid ratio, trade receivable
(c) current ratio, inventory
(d) liquid ratio, inventory
Answer: (d) Liquid ratio, inventory

Question. The credit sale of M/s. Dinesh & Sons is Rs. 21,00,000. It’s debtors and bills receivables of the end of the accounting period amounted to Rs. 2,00,000 and Rs. 1,50,000 respectively. What will be the debtor’s turnover ratio?
(a) 4 times
(b) 5 times
(c) 6 times
(d) 7 times
Answer: (c) 6 times
Debtor’s Turnover Ratio = \( \frac{\text{Net Credit Sales}}{\text{Average Trade Receivables}} \)
\( = \frac{21,00,000}{(2,00,000 + 1,50,000)} = 6 \) times

Question. Total purchase Rs. 1,70,000, cash purchases Rs. 16,000, purchase return Rs. 8,000, creditors at the end of the year Rs. 32,000, creditors inthe beginning Rs. 24,000. What will be the creditors turnover ratio?
(a) 5.12 times
(b) 5.16 times
(c) 5.21 times
(d) 5.25 times
Answer: (c) 5.21 times
Net Credit Purchase \( = \) Total Purchase \( - \) Cash Purchase \( - \) Purchase Return
\( = 1,70,000 - 16,000 - 8,000 = \text{Rs. } 1,46,000 \)
Average Trade Payable \( = \frac{\text{Opening Trade Payable + Closing Trade Payable}}{2} \)
\( = \frac{24,00,0 + 32,000}{2} = 28,000 \)
Creditors Turnover Ratio \( = \frac{\text{Net Credit Purchase}}{\text{Average Trade Payable}} \)
\( = \frac{1,46,000}{28,000} = 5.21 \) times

Question. Proprietary ratio will be: (Long-term borrowings: Rs. 2,00,000; Long-term provision: Rs. 1,00,000; Current liabilities: Rs. 50,000; Non-Current assets: Rs. 3,60,000; Current assets: Rs. 90,000)
(a) 22.2%
(b) 2.8%
(c) 36%
(d) None of the options
Answer: (a) 22.2%
Proprietary Ratio \( = \frac{\text{Shareholders' Fund}}{\text{Total Assets}} \)
Shareholders’ Fund \( = \) Total Assets* \( - \) Long-term Borrowings \( - \) Long-term Provision \( - \) Current Liabilities
\( = 4,50,000 - 50,000 - 1,00,000 - 2,00,000 = \text{Rs. } 1,00,000 \)
Total Assets* \( = \) Non-current Assets \( + \) Current Assets
\( = 3,60,000 + 90,000 = \text{Rs. } 4,50,000 \)
Proprietary Ratio \( = \frac{1,00,000}{4,50,000} \times 100 = 22\% \)

Question. Calculating Operating Ratio, if cost of revenue from operations Rs. 50,000, Revenue from operations Rs. 1,50,000 and Operating expenses Rs. 20,000.
(a) 45%
(b) 46.7%
(c) 48.1%
(d) 42.2%
Answer: (b) 46.7%
Operating Ratio \( = \frac{\text{Cost of Revenue from Operations + Operating Expenses} \times 100}{\text{Revenue from Operations}} \)
\( = \frac{50,000 + 20,000}{1,50,000} \times 100 = 46.7\% \)

Question. The ______ is useful in evaluating credit and collection policies.
(a) average payment period
(b) current ratio
(c) average collection period
(d) current assets turnover
Answer: (c) average collection period

Question. The ______ measures the activity of a firm’s inventory. 
(a) average collection period
(b) inventory turnover
(c) liquid ratio
(d) current ratio
Answer: (b) inventory turnover

Question. ABC Co. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was. 
(a) 30 days
(b) 36 days
(c) 47 days
(d) 37 days
Answer: (c) 47 days

Question. ______ are especially interested in the average payment period, since it provides them with a sense of the bill paying patterns of the firm. 
(a) Customers
(b) Stockholders
(c) Lenders and suppliers
(d) Borrowers and buyers
Answer: (c) Lenders and suppliers

Question. The ______ ratios provide the information critical to the long-run operation of the firm. 
(a) liquidity
(b) activity
(c) solvency
(d) profitability
Answer: (c) solvency

Question. Which of the following transactions will improve the current ratio:
(a) Cash collected from trade receivables
(b) Purchase of goods for cash
(c) Payment to trade payables
(d) Credit purchase of goods
Answer: (c) Payment to trade payables

Question. Operating ratio is:
(a) Cost of revenue from operations + Selling expenses/Net revenue from operations
(b) Cost of production + Operating expenses/Net revenue from operations
(c) Cost of revenue from operations + Operating expenses/Net revenue from operations
(d) Cost of production/Net revenue from operations
Answer: (c) Cost of revenue from operations + Operating expenses/Net revenue from operations

Question. Proprietary ratio is:
(a) Long-term debts/Shareholders’ funds
(b) Total assets/Shareholders’ funds
(c) Shareholders’ funds/Total assets
(d) Shareholders’ funds/Fixed assets
Answer: (c) Shareholders’ funds/Total assets

Question. Assertion : Tanmay Ltd. has a Proprietary Ratio of 25% to maintain this ratio at 30%, management may increase the current assets
Reason : To increase the proprietary ratio the management may increase equity or reduce the debts increase of current asset will reduce the ratio.
(a) Both A and R true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true and R is false
(d) A is false and R is true
Answer: (d) A is false and R is true

Question. Assertion : Accounting ratio is a mathematical expression of relationship between one item of the group of item in the Financial Statement.
Reason : Accounting ratio is a mathematical expression of relationship between two items group of item in the Financial Statement.
(a) Both A and R true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true and R is false
(d) A is false and R is true
Answer: (d) A is false and R is true

Question. Assertion : The objective of computing operating ratio is to assess the operational efficiency of the business.
Reason : It shows the percentage of Revenue from operations that is absorbed by the cost of Revenue from operations and operating expenses.
(a) Both A and R true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true and R is false
(d) A is false and R is true
Answer: (a) Both A and R true and R is the correct explanation of A.

Question. Assertion : Operating ratio establishes the relationship between Operating profit and Revenue from operations.
Reason : Operating ratio establishes the relationship between Operating Cost (Cost of revenue from operations + operating expenses) and Revenue from operations.
(a) Both A and R true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A
(c) A is true and R is false
(d) A is false and R is true
Answer: (d) A is false and R is true

Assuming that Debt Ratio is 2, state giving reasons whether this ratio would increase, decrease or reamin unchanged in the following cases:

Question. Purchase of fixed asset on a long-term deferred payment basis:
(a) Decrease
(b) Increase
(c) No change
(d) None of the options
Answer: (b) Increase

Question. Issue of new share for cash:
(a) Decrease
(b) Increase
(c) No change
(d) None of the options
Answer: (a) Decrease

Question. Sale of fixed asset at a loss of Rs. 3000:
(a) Decrease
(b) Increase
(c) No change
(d) None of the options
Answer: (b) Increase

Question. Purchase of fixed asset on a credit of 2 months:
(a) Decrease
(b) Increase
(c) No change
(d) None of the options
Answer: (d) No change

Opening Inventory: Rs. 3,00,000; Closing Inventory: Rs. 4,20,000; Purchase: Rs. 14,00,000; Wages: Rs. 3,70,000; Carriage Inwards: Rs. 150000; Administrative Expenses: Rs. 84,000; Selling Expenses: Rs. 36,000; Income Tax: Rs. 1,00,000; Profit on sale of fixed assets: Rs. 20,000; Revenue from Operations (Sales): Rs. 24,00,000.

Question. Calculate Gross profit Ratio:
(a) 20%
(b) 30%
(c) 40%
(d) 25%
Answer: (d) 25%

Question. Calculate Operating Ratio:
(a) 30%
(b) 25%
(c) 80%
(d) None of the options
Answer: (c) 80%

Question. Calculate Operating profit ratio:
(a) 20%
(b) 29%
(c) 10%
(d) 5%
Answer: (a) 20%

Question. Calculate Net profit ratio:
(a) 15.79%
(b) 16.67%
(c) 17.67%
(d) 18.67%
Answer: (b) 16.67%

Following are the information obtained from the books of Kamakshi Ltd.
Inventory on 31st March 2016-2017: Rs. 7,00,000; 2017-2018: Rs. 17,00,000
Revenue from Operations 2016-2017: Rs. 50,00,000; 2017-2018: Rs. 75,00,000
(Gross profit is 25% on cost of revenue from operations)
In the year 2016-17 inventory increased by Rs. 2,00,000.

Question. What will be the inventory turnover ratio for year 2017-18?
(a) 4 times
(b) 2 times
(c) 3 times
(d) 5 times
Answer: (d) 5 times

Question. What will be the Cost of Revenue from Operations for year 2016-17 ?
(a) Rs. 10,00,000
(b) Rs. 40,00,000
(c) Rs. 20,00,000
(d) Rs. 30,00,000
Answer: (b) Rs. 40,00,000

Question. What will be the Average Inventory for the year 2017-18?
(a) Rs. 1,00,000
(b) Rs. 30,00,000
(c) Rs. 12,00,000
(d) Rs. 1,50,000
Answer: (c) Rs. 12,00,000

Question. What will be the Inventory Turnover Ratio for year 2016-17?
(a) 4.57 times
(b) 4.00 times
(c) 6.67 times
(d) 8.87 times
Answer: (c) 6.67 times

Calculate Operating Profit Ratio in the following cases:
Case I- Revenue from operations (Sales) Rs. 6,00,000; Operating Profit Rs. 1,20,000.
Case II- Revenue from Operations (Sales) Rs. 5,00,000; Cost of Revenue from operations Rs. 4,00,000; Operating Expenses Rs. 20000.
Case III- Revenue from Operations (Sales) Rs. 10,00,000; Gross Profit 25% on sales; Operating Expenses Rs. 70,000.

Question. What will be the Operating Profit Ratio in Case I ?
(a) 12%
(b) 10%
(c) 14%
(d) 20%
Answer: (d) 20%

Question. What will be the Operating Profit in case II ?
(a) Rs. 40,000
(b) Rs. 50,000
(c) Rs. 80,000
(d) Rs. 60,000
Answer: (d) Rs. 60,000

Question. What will be the Operating Profit Ratio in Case II ?
(a) 16%
(b) 17%
(c) 11%
(d) 13%
Answer: (a) 16%

Question. What will be the Operating Profit Ratio in Case III ?
(a) 12%
(b) 13%
(c) 14%
(d) 18%
Answer: (d) 18%