CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes

Accountancy Concept Notes for Class 12: Part 2 Chapter 05 Accounting Ratios

Explore reliable concept summaries and revision materials through the CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes. Tailored for Class 12 learners, utilizing these notes for Accountancy Part 2 Chapter 05 Accounting Ratios ensures thorough preparation and strengthens core academic definitions before final evaluations.

Download Part 2 Chapter 05 Accounting Ratios Revision Notes PDF

Navigate directly to the revision notes for Part 2 Chapter 05 Accounting Ratios using the digital viewer below. Each summary is structured to highlight high-weightage sections, allowing students to instantly access critical definitions and focus on core exam topics.

Accounting Ratios
 
Accounting Ratio : It is an arithmetical relationship between two accounting variables.

Ratio Analysis : It is a technique of analysis of financial statements to conduct a quantitative analysis of information in a company’s financial statements.
“Ratio analysis is a study of relationship among various financial factors in a business.”- Myers
 
Expression of ration: Ratios are expressed in following four ways:
· Pure Ratio Like 2:1. All liquidity and solvency ratios are expressed in pure form.
· Percentage e.g. 15%. All profitability ratios are presented in percentage form.
· Times Like 4 times. All turnover ratios and Interest Coverage Ratio are presented in this form.
· Fraction like 3/4.
 
Classification or Types of Ratios:
 
Ratios can be classified into following 4 categories:
1. Liquidity Rations
2. Solvency Rations
3. Activity Rations also known as turnover Ratios or Performance Ratios.
4. Profitability Rations
 
IMPORTANT POINT
 
Note: For Calculation of ratios Formula must be written as it carries marks. Liquidity Ratios: These measure short term solvency, i.e. the firm’s ability to pay its current dues. In Liquidity Rations the following two ratios are included.
 
1. Current Ratio also called Working Capital Ratio.
2. Liquid Ratio also called Quick Ratio or Acid Test Ratio.
1. Current Ratio : It shows the relationship of current assets with current liabilities
Current Ratio =
 
Current Assets
 
An asset shall be classified as current when it satisfies any of the following criteria:
(a) it is expected to be realized in, or is intended for sale or consumption in, the company’s normal operating cycle:
(b) it is held primarily for the purpose of being traded:
(c) it is expected to be realized within twelve months after the reporting date; or
(d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.
 
The following items are include under Current Assets:
 
(a) Current investments
(b) Inventories
(c) Trade receivables (Debtors and Bills Receivables) after deducting any provision for
 
1. Debt Equity Ratio: It show relationship between Debts (Long term Liabilities or Non Current Liabilities) and Equity (Shareholders’ Funds).
Debt Equity Ratio =
Debts = Long-term borrowing + Long-term provisions
Equity/Shareholders’ Funds = Share Capital + Reserves and Surplus – Non – Trading Investments
 
OR
 
Equity/Shareholders’ Funds = Fixed Assets (Tangible and Intangible) + Non Current
Investment (Excluding Non Trading investment) +Long Terms Loans and Advances + Current
Assets – Current Liabilities – Long –term borrowings – Long – term Provision
 
1. Significance: It assesses the long term soundness of financial position of a business.
2. Ideal Ratio: 2:1 is considered as best but it should not be more than this.
2. Total Assets to Debt Ratio : It shows the relationship between Total Assets and Debts.
 
Total Assets To Debt Ratio =
 
Total Assets = Fixed Assets (Tangible and Intangible) + Non Current Investment (Excluding Non Trading Investment) + Long Term Loans and Advances + Current Assets Debts = Long-term borrowing + Long-term provisions
 
Significance: It measures the safety margin available to the providers of long term loans.
 
Ideal Ratio: No ideal ratio but a high ratio indicates higher safety to lenders and low ratio represents risky position.
 
3. Proprietary Ratio: It shows the relationship between Proprietors’ Funds/shareholders’ Funds and Total Assets of the business.
Proprietary Ratio = Proprietors’ Funds = Share Capital + Reserves and Surplus-Non Trading Investment

OR
 
Equity/Proprietors’ Funds = Fixed Assets (Tangible and intangible) + Non Current
investments (Excluding Non Trading investment) + Long Terms Loans and Advances +
Current Assets – Current Liabilities – Long – term borrowings – Long term provisions.
Total Assets = Fixed Assets (Tangible and Intangible) + Non Current Investment (Excluding
Non trading Investment) +long Term Loans and Advances + Current Assets
 
1. Significance: It measures the proportion of total assets financed by the Proprietors of the business. It shows the safety margin available to the lenders of the business as they can ascertain the portion of the shareholders in the business.
 
2. Ideal Ratio: No ideal ratio but a high ratio indicates higher safety to lenders and law ratio represents risky position from lender’s point of view.
 
4.Interest Coverage Ratio : This ratio establishes relationship between the Net Profit before Interest & Tax and interest payable on long term debts (Fixed Interest Charges)
Interest Coverage Ratio =
 
1. Since interest is a charge on profit, net profit taken to calculate this ratio is before interest & tax.
2. Objective & Significance-Objective is to ascertain the amount of profit available to cover the interest charge. It determines ease with which a company can pay interest expense on outstanding debt.
3. Parties interested in this ratio are debenture holders and lenders of long term credit.
4. High Ratio is better for lenders as it indicates higher safety margin.


Please click on below link to download CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes

Free study material for Accountancy

Study Material and Revision Notes for Class 12 Accountancy Part 2 Chapter 05 Accounting Ratios

Quick Revision Notes: Part 2 Chapter 05 Accounting Ratios (CBSE)

Review targeted chapter notes for Class 12 Accountancy Part 2 Chapter 05 Accounting Ratios. Built according to official CBSE guidelines, these summaries highlight high-yield topics frequently tested in school evaluations.

Expert Study Material for Class 12 Accountancy

Cross-reference your comprehension with comprehensive NCERT solutions for Class 12 to ensure absolute clarity across all sub-topics in this chapter.

Complete Your Chapter Revision

Wrap up your chapter revision by testing your knowledge against standard question formats. Everything on our platform is provided free of charge.

FAQs

Where can I download the latest PDF for CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes?

You can download the teacher prepared revision notes for CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes from StudiesToday.com. These notes are designed as per 2026-27 academic session to help Class 12 students get the best study material for Accountancy.

Are these Accountancy notes for Class 12 based on the 2026 board exam pattern?

Yes, our CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes include 50% competency-based questions with focus on core logic, keyword definitions, and the practical application of Accountancy principles which is important for getting more marks in 2026 CBSE exams.

Do these Class 12 notes cover all topic-wise concepts for Accountancy?

Yes, our CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes provide a detailed, topic wise breakdown of the chapter. Fundamental definitions, complex numerical formulas and all topics of CBSE syllabus in Class 12 is covered.

How can I use CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes for quick last-minute revision?

These notes for Accountancy are organized into bullet points and easy-to-read charts. By using CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes, Class 12 students fast revise formulas, key definitions before the exams.

Is there any registration required to download Class 12 Accountancy notes?

No, all study resources on StudiesToday, including CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes, are available for immediate free download. Class 12 Accountancy study material is available in PDF and can be downloaded on mobile.