CBSE Class 12 Accountancy Accounting Ratios MCQs Set 05

Question: Current ratio is also known as :-
a) Solvency Ratio
b) Acid Test Ratio
c) Working Capital Ratio
d) Liquid Ratio
Answer: c

Question: What is trade investment?
a) Trading in securities
b) Investment in his own business
c) Investment in other company for promotion of his own business
d) None of the above
Answer: c

Question: If cash sales is Rs. 2,00,000 and credit sales is 20% of total sales. Calculate amount of credit sales.
a) Rs. 50,000
b) Rs. 2,50,000
c) Rs. 16,000
d) Rs. 3,00,000
Answer: b

Question: Total assets of a firm are Rs. 20,00,000 and its fixed assets are Rs. 8,00,000. What will be the percentage of Fixed assets on total assets?
a) 40%
b) 58%
c) 28%
d) 71%
Answer: a

Question: Current ratio is 2:1, Current assets = Rs. 82,000. What will be current liabilities?
a) Rs. 41,000
b) Rs. 38,000
c) Rs. 15,000
d) Rs. 20,000
Answer: b

Question: Financial analysis becomes useless because it :
a) Measures the profitability
b) Measures the solvency
c) Lacks qualitative analysis
d) Marks a comparative study
Answer: c

Question: Proprietary ratio: Share capital Rs. 5,00,000, reserve & surplus Rs. 2,00,000, general reserve Rs. 1,00,000, total assets Rs. 21,00,000. Calculate.
a) 0.33:1
b) 0.38:1
c) 0.48:1
d) 0.50:1
Answer: a

Question: Securities premium reserve included in :-
a) Debt
b) Equity
c) Liquid assets
d) Cost of revenue from operations
Answer: b

Question: Current ratio 1.5:1, Working capital Rs. 30,000. What will be the current liabilities?
a) 20,000
b) 60,000
c) 1,65,000
d) 1,50,000
Answer: b

Question: A company’s revenue from operations are Rs. 20,00,000, cost of revenue from operations is Rs. 14,00,000 and indirect expenses are Rs. 2,00,000. What is the amount of gross profit?
a) Rs. 18 Lakhs
b) Rs. 4 Lakhs
c) Rs. 8 Lakhs
d) Rs. 6 Lakhs
Answer: d

Question: Fixed assets of a company are increased from Rs. 3,00,000 to Rs. 4,00,000. What is the percentage change?
a) 25%
b) 33.3%
c) 20%
d) 40%
Answer: b

Question: Parties interested in financial analysis are :
a) Investors
b) Government
c) Financial institutions
d) All of the above
Answer: d

Question: A company’s current liabilities decreased from Rs. 4,00,000 to Rs. 3,00,000. What is the percentage of change?
a) 25%
b) 33.3%
c) 20%
d) 40%
Answer: b

Question: Trade receivable turnover ratio 5 times, average trade receivables Rs. 60,000. Calculate net credit revenue from operations.
a) Rs. 3,00,000
b) Rs. 2,00,000
c) Rs. 12,000
d) Rs. 2,40,000
Answer: a

Question: A company’s working capital is Rs. 10 lakhs (Negative Balance) in 2018. It became Rs. 15 lakhs in 2019. What is the percentage of change?
a) 150%
b) 100%
c) 250%
d) 50%
Answer: a

Question: Debt equity ratio is:
a) Short term solvency ratio
b) Long term solvency ratio
c) Liquidity ratio
d) Profitability ratio
Answer: b

Question: Which of the following is not a limitation of analysis of financial statements?
a) Affected by personal basis
b) To know the financial strength
c) Lack of qualitative analysis
d) Based on accounting concepts
Answer: b

Question: Total assets of a firm are Rs. 8,20,000 and its fixed assets are Rs. 5,90,000. What will be the percentage of current assets on total assets?
a) 42%
b) 58%
c) 28%
d) 72%
Answer: c

Question: Current ratio 4:1, Current assets Rs. 60,000. Quick ratio is 2.5:1. Calculate inventory.
a) 22,500
b) 37,500
c) 15,000
d) 25,000
Answer: a

Question: Main limitation of financial analysis is:
a) To know the earning capacity
b) To know financial strength
c) Do not reflect changes in price level
d) Comparative study with other firms
Answer: c

Question: Current assets Rs. 4,00,000; Current liabilities Rs. 2,00,000 and inventory Rs. 50,000. Liquid ratio will be :
a) 2 : 1
b) 2.25 : 1
c) 4 : 7
d) 1.75 : 1
Answer: d

Question: If capital employed is Rs. 8,00,000, total debt is Rs. 5,00,000, current liability is Rs. 2,00,000, then debt-equity ratio will be
a) 5 : 3
b) 3 : 5
c) 1 : 1
d) 8 : 5
Answer: b

Question: Working capital is the :
a) Cash and bank balance
b) Capital borrowed from banks
c) Difference between current assets and current liabilities
d) Difference between current assets and fixed assets
Answer: c

Question: Equity share capital Rs. 20,00,000; Reserves Rs. 5,00,000; Debentures Rs. 10,00,000; Current liabilities Rs. 8,00,000. Debt-equity ratio will be :
a) 0.4 : 1
b) 0.32 : 1
c) 0.72 : 1
d) 0.5 : 1
Answer: a

Question: A company’s quick ratio is 1.8 : 1; liquid assets are Rs. 5,40,000 and inventory is Rs. 1,50,000. Its current ratio will be :
a) 2 : 1
b) 2.3 : 1
c) 1.8 : 1
d) 1.3 : 1
Answer: b

Question: What will be the amount of gross profit, if revenue from operations are Rs. 6,00,000 and gross profit ratio is 20% of revenue from operations?
a) Rs. 1,50,000
b) Rs. 1,00,000
c) Rs. 1,20,000
d) Rs. 5,00,000
Answer: c

Question: Two basic measures of liquidity are:
a) Inventory turnover and current ratio
b) Current ratio and quick ratio
c) Gross profit ratio and operating ratio
d) Current ratio and average collection period
Answer: b

Question: A company’s quick ratio is 1.5 : 1; current liabilities are Rs. 2,00,000 and inventory is Rs. 1,80,000. Current ratio will be :
a) 0.9 : 1
b) 1.9 : 1
c) 1.4 : 1
d) 2.4 : 1
Answer: d

Question: Current assets include only those assets which are expected to be realized within …
a) 3 months
b) 6 months
c) 1 year
d) 2 years
Answer: c

Question: Current ratio is :
a) Solvency ratio
b) Liquidity ratio
c) Activity ratio
d) Profitability ratio
Answer: b

Question: If the liquid ratio of a company is 1.5 : 1, then the company purchased goods of Rs. 50,000.
a) Decrease in liquid ratio
b) Increase in liquid assets
c) Decrease in current liability
d) Increase in liquid ratio
Answer: a

Question: A company’s liquid assets are Rs. 5,00,000 and its current liabilities are Rs. 3,00,000. Thereafter, it paid Rs. 1,00,000 to its trade payables. Quick ratio will be :
a) 1.33 : 1
b) 2.5 : 1
c) 1.67 : 1
d) 2 : 1
Answer: d

Question: Fixed assets Rs. 5,00,000; Current assets Rs. 3,00,000; Equity share capital Rs. 4,00,000; Reserve Rs. 2,00,000; Long-term debts Rs. 40,000. Proprietary ratio will be :
a) 75%
b) 80%
c) 125%
d) 133%
Answer: a

Question: Total revenue from operations Rs. 9,00,000; Cash revenue from operations Rs. 3,00,000; Debtors Rs. 1,00,000; B/R Rs. 20,000. Trade receivables turnover ratio will be :
a) 5 times
b) 6 times
c) 7.5 times
d) 9 times
Answer: a

Question: If net revenue from operations of a firm are Rs. 15,00,000, gross profit is Rs. 9,00,000 and operating expenses are Rs. 75,000. What will be the percentage of operating income on net revenue from operations?
a) 45%
b) 55%
c) 35%
d) 65%
Answer: b

Question: Liquid assets do not include:
a) Bills receivable
b) Debtors
c) Inventory
d) Bank balance
Answer: c

Question: Current ratio is :
a) Liquid assets / Current assets
b) Fixed assets / Current assets
c) Current assets / Current liabilities
d) Liquid assets / Current liabilities
Answer: c

Question: Revenue from operations is Rs. 1,80,000; Rate of gross profit is 25% on cost. What will be the gross profit?
a) Rs. 45,000
b) Rs. 36,000
c) Rs. 40,000
d) Rs. 60,000
Answer: b

Question: Ideal current ratio is :
a) 1 : 1
b) 1 : 2
c) 1 : 3
d) 2 : 1
Answer: d

Question: Current assets Rs. 4,00,000; Current liabilities Rs. 2,00,000 and inventory Rs. 50,000. Liquid ratio will be :
a) 2 : 1
b) 2.25 : 1
c) 4 : 7
d) 1.75 : 1
Answer: d

Question: If capital employed is Rs. 8,00,000, total debt is Rs. 5,00,000, current liability is Rs. 2,00,000, then debt-equity ratio will be
a) 5 : 3
b) 3 : 5
c) 1 : 1
d) 8 : 5
Answer: b

Question: Working capital is the :
a) Cash and bank balance
b) Capital borrowed from banks
c) Difference between current assets and current liabilities
d) Difference between current assets and fixed assets
Answer: c

Question: Equity share capital Rs. 20,00,000; Reserves Rs. 5,00,000; Debentures Rs. 10,00,000; Current liabilities Rs. 8,00,000. Debt-equity ratio will be :
a) 0.4 : 1
b) 0.32 : 1
c) 0.72 : 1
d) 0.5 : 1
Answer: a

Question: A company’s quick ratio is 1.8 : 1; liquid assets are Rs. 5,40,000 and inventory is Rs. 1,50,000. Its current ratio will be :
a) 2 : 1
b) 2.3 : 1
c) 1.8 : 1
d) 1.3 : 1
Answer: b

Question: What will be the amount of gross profit, if revenue from operations are Rs. 6,00,000 and gross profit ratio is 20% of revenue from operations?
a) Rs. 1,50,000
b) Rs. 1,00,000
c) Rs. 1,20,000
d) Rs. 5,00,000
Answer: c

Question: Two basic measures of liquidity are:
a) Inventory turnover and current ratio
b) Current ratio and quick ratio
c) Gross profit ratio and operating ratio
d) Current ratio and average collection period
Answer: b

Question: A company’s quick ratio is 1.5 : 1; current liabilities are Rs. 2,00,000 and inventory is Rs. 1,80,000. Current ratio will be :
a) 0.9 : 1
b) 1.9 : 1
c) 1.4 : 1
d) 2.4 : 1
Answer: d

Question: Current assets include only those assets which are expected to be realized within …
a) 3 months
b) 6 months
c) 1 year
d) 2 years
Answer: c

Question: Current ratio is :
a) Solvency ratio
b) Liquidity ratio
c) Activity ratio
d) Profitability ratio
Answer: b

Question: If the liquid ratio of a company is 1.5 : 1, then the company purchased goods of Rs. 50,000.
a) Decrease in liquid ratio
b) Increase in liquid assets
c) Decrease in current liability
d) Increase in liquid ratio
Answer: a

Question: A company’s liquid assets are Rs. 5,00,000 and its current liabilities are Rs. 3,00,000. Thereafter, it paid Rs. 1,00,000 to its trade payables. Quick ratio will be :
a) 1.33 : 1
b) 2.5 : 1
c) 1.67 : 1
d) 2 : 1
Answer: d

Question: Fixed assets Rs. 5,00,000; Current assets Rs. 3,00,000; Equity share capital Rs. 4,00,000; Reserve Rs. 2,00,000; Long-term debts Rs. 40,000. Proprietary ratio will be :
a) 75%
b) 80%
c) 125%
d) 133%
Answer: a

Question: Total revenue from operations Rs. 9,00,000; Cash revenue from operations Rs. 3,00,000; Debtors Rs. 1,00,000; B/R Rs. 20,000. Trade receivables turnover ratio will be :
a) 5 times
b) 6 times
c) 7.5 times
d) 9 times
Answer: a

Question: If net revenue from operations of a firm are Rs. 15,00,000, gross profit is Rs. 9,00,000 and operating expenses are Rs. 75,000. What will be the percentage of operating income on net revenue from operations?
a) 45%
b) 55%
c) 35%
d) 65%
Answer: b

Question: Liquid assets do not include:
a) Bills receivable
b) Debtors
c) Inventory
d) Bank balance
Answer: c

Question: Current ratio is :
a) Liquid assets / Current assets
b) Fixed assets / Current assets
c) Current assets / Current liabilities
d) Liquid assets / Current liabilities
Answer: c

Question: Revenue from operations is Rs. 1,80,000; Rate of gross profit is 25% on cost. What will be the gross profit?
a) Rs. 45,000
b) Rs. 36,000
c) Rs. 40,000
d) Rs. 60,000
Answer: b

Question: Ideal current ratio is :
a) 1 : 1
b) 1 : 2
c) 1 : 3
d) 2 : 1
Answer: d

Question: If average inventory is Rs. 30,000 and closing inventory is Rs. 20,000 more than the opening, what will be the value of closing inventory?
a) Rs. 10,000
b) Rs. 20,000
c) Rs. 30,000
d) Rs. 40,000
Answer: d

Question: On the basis of the following information received from a firm, its Total Assets–Debt ratio will be:
a) 40%
b) 60%
c) 30%
d) 70%
Answer: a

Question: If revenue from operations is Rs. 12,00,000 and cash revenue from operations is 20% of credit revenue from operations, what will be credit revenue from operations?
a) Rs. 2,00,000
b) Rs. 8,00,000
c) Rs. 10,00,000
d) Rs. 12,00,000
Answer: c

Question: Revenue from operations Rs. 6,00,000; Gross profit 20%; Office expenses Rs. 30,000; Selling expenses Rs. 48,000. Calculate operating ratio.
a) 80%
b) 85%
c) 96.33%
d) 93%
Answer: d

Question: If the operating cycle cannot be identified then it is assumed to have a duration of_______________
Answer: 12 months.

 Question: Lower the Gross Profit Ratio, higher will be the profitability of a company.
Answer: False

Question: Provisions for employee benefits is shown under the sub head
Answer: short term provisions

Question: Earning capacity of a business is assessed through ________ ratio.
Answer: profitability

Question: The statement which shows the assets and liabilities of a company is called _______________
Answer: Balance sheet.

Question: Solvency refers to the ability of the enterprise to meet its current obligations.
Answer: True

Question: Prepaid expenses are shown under the main head ________ in the balance sheet of the company.
Answer: current assets

State whether the following statement is True or False:
Question: Current ratio improves with increase in sales at profir.
Answer: True

Question: Liquidity or short term financial position of a business is assessed through__________ ratio.
Answer: Liquidity

Question: Provision for tax is shown under the sub head___________
Answer: short term provisions.

Fill in the blanks with appropriate word ……………

Question: Financial year in case of a company is from _____ to _______
Answer: 1 April 31 March.

Question: Statement of Profit and Loss account is also called___________
Answer: Income statement.

Question:An ideal Quick Ratio is ……………
Answer: 1:1

Question: Solvency of business is assessed through ______
Answer: solvency ratio

Question: Interest accrued and due on debenture is shown under the heading non-current liabilities.
Answer: False

Question: 12% borrowings in a company‘s balance sheet is shown under the sub heading long term borrowings.
Answer: True

Question: A total asset is assumed to be 100 on the asset side in case of common size balance sheet.
Answer: True

Question: A short term borrowing is disclosed under current liabilities in the cocompany’s balance sheet.
Answer: True

Question: Vertical analysis is useful in time series analysis.
Answer: False

Question: Revenue from operations includes sale of products and sale of services.
Answer: True

Question: Common size statements enable horizontal analysis.
Answer: False

Question: 12% borrowings in a company‘s balance sheet is shown under the sub heading long term borrowings.
Answer: True

Question: Financial analysis removes the limitations of financial statements.
Answer: False

Question: Financial statements show qualitative information.
Answer: False

Question: Contingent liabilities are shown in the balance sheet under the heading current liabilities.
Answer: False