CBSE Class 12 Accountancy Ratio Analysis Worksheet

MCQ Questions for NCERT Class 12 Accountancy Ratio Analysis

Question. Trade receivable Includes:
(a) Debtors
(b) Bills receivables
(c) both (a) and (b)
(d) Either (a) or (b)

Answer: C

Question. 100- Operating Profit Ratio is equal to
(a) Operating Ratio
(b) Operating Net profit Ratio
(c) Gross Profit Ratio
(d) Current ratio

Answer: A

Question. Liquid Assets=
(a) Current Assets-Inventory
(b) Current Assets- (Inventory + prepaid Expenses)
(c) Current Assets + Inventory
(d) None of the above

Answer: B

Question. Debts to Equity ratio=
(a) Debitd/Equity
(b) Debts/Shareholders Fund
(c) Both (a) and (b)
(d) None of these

Answer: C

Question. Activity Ratio Also Known As
(a) Performance Ratio
(b) Turnover Ratio
(c) Both (a) and (b)
(d) None of the above

Answer: C

Question. Which of following is not Activity Ratio?
(a) Inventory Turnover Ratio
(b) Trade receivable turnover Ratio
(c) Interest coverage Ratio
(d) All of these

Answer: C

Question. Inventory Turnover Ratio=
(a) Cost of revenue from operation/Average Inventory
(b) Cost of revenue from operation/Opening Inventory
(c) Cost of revenue from operation/Closing Inventory
(d) None of these

Answer: A

Question. Ideal Current Ratio is
(a) 3:1
(b) 2:2
(c) 2:1
(d) 1:1

Answer: C

Question. Assuming liquid ratio of 1.2 : 1, cash collected from debtors would :
(a) increase liquid ratio
(b) decrease liquid ratio
(c) have no effect on liquid ratio
(d) increase gross profit ratio

Answer: C

Question. If Trade Payable turnover ratio shows a high turnover ratio it means
(a) Availability of less credit or fast payment
(b) Profitability of the firm
(c) Net Profit
(d) Shows after how much times funds are collected

Answer: A

Question. Activity Ratios is relate to
(b) Profit
(b) Sales or cost of goods sold
(c) Loss
(d) None of the options

Answer: B

Question. Establishes the relationship between long-term debt (external equities) and the equity (internal equities)
(a) Quick Ratio
(b) Test Ratio
(c) None of the options
(d) Debt to Equity ratio

Answer: D

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

Question. Total credit revenue from operations of a firm is Rs.5,40,000. Average collection period is 3 months. Opening debtors are Rs. 1,10,000. Its closing debtors will be :
(a) Rs.1,35,000
(b) Rs.1,60,000
(c) Rs.2,20,000
(d) Rs.1,80,000

Answer: B

Question. On the basis of following data, the cost of revenue from operations by a company will be : Opening Inventory Rs.70,000; Closing Inventory Rs.80,000; Inventory Turnover Ratio 6 Times.
(a) Rs.1,50,000
(b) Rs.90,000
(c) Rs.4,50,000
(d) Rs.4,80,000

Answer: C

Question. A Company’s Current Assets are Rs. 8,00,000 and its current liabilities are Rs.4,00,000. Subsequently, it purchased goods for Rs. 1,00,000 on credit. Current ratio will be 
(a) 2 : 1
(b) 2.25 : 1
(c) 1.8:1
(d) 1.6:1

Answer: C

Question. On the basis of following data, a Company’s Total Assets-Debt Ratio will be: Working Capital Rs.2,70,000; Current Liabilities Rs.30,000; Fixed Assets Rs.4,00,000; Debentures Rs.2,00,000; Long Term Bank Loan Rs. 80,000.
(a) 37%
(b) 40%
(c) 45%
(d) 70%

Answer: B

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. On the basis of following data, the Debt-Equity Ratio of a Company will be: Equity Share Capital Rs.5,00,000; General Reserve Rs.3,20,000; Preliminary Expenses Rs.20,000; Debentures Rs.3,20,000; Current Liabilities Rs.80,000.
(a) 1 : 2
(b) .52 : 1
(c) .4 : 1
(d) .37 : 1

Answer: C

Question. Credit revenue from operations Rs.6,00,000; Cash revenue from operations Rs.1,50,000; Debtors Rs.1,00,000; B/R Rs.50,000. Average Collection Period will be :
(a) 2 Months
(b) 2.4 Months
(c) 3 Months
(d) 1.6 Months

Answer: C

Question. Long term solvency is indicated by :
(a) Current Ratio
(b) Quick Ratio
(c) Net Profit Ratio
(d) Debt/Equity Ratio

Answer: D

Question. Sincere Ltd. has a Proprietary Ratio of 25%. To maintain this ratio at 30%, management may ~
(a) increase Equity.
(b) Reduce Debt.
(c) Either Increase Equity or Reduce Debt.
(d) lncrease Current Assets.

Answer: C

Question. Average Inventory is used to calculate the_______
(a) Inventory Turnover Ratio
(b) Interest Coverage Ratio
(c) Debt Equity Ratio
(d) Current Ratio

Answer: A

Question. The quick ratio of a company is 2 : 1. State giving reasons, (for any four) which of the following would improve, reduce or not change the ratio
(a) Purchase of goods on credit (iii) Sale of furniture at cost
(b) Sale of goods at a profit
(c) Purchase of machinery for cash
(d) None of the options

Answer: C

Question. Current liabilities of a company were Rs.2,00,000 and its current ratio was 2.5 : 1. After this the company paid Rs. 1,00,000 to a trade payable. The current ratio after the payment will be :
(a) 2 : 1
(b) 4 : 1
(c) 5 : 1
(d) None of the above

Answer: A

Question. Name the difference between Capital Employed and Non-current Liabilities:
(a) Shareholders’ Funds
(b) Capital Employed
(c) Total Debts
(d) Total Assets

Answer: A

Question. A Company’s Current Ratio is 2.8 : 1; Current Liabilities are Rs.2,00,000; Inventory is Rs. 1,50,000 and Prepaid Expenses are Rs. 10,000. Its Liquid Ratio will be :
(a) 3.6 : 1
(b) 2.1 : 1
(c) 2 : 1
(d) 2.05 : 1

Answer: C

Question. Quick Ratio is also known as :
(a) Liquid Ratio
(b) Current Ratio
(c) Working Capital Ratio
(d) None of the Above

Answer: A

Question. The Two Basic Measures of Liquidity Ratio are-
(a) Stock and Debtors Turnover Ratio
(b) Current Ratio and operating ratio
(c) Current ratio and Liquid ratio
(d) Gross and Net profit Ratio

Answer: C

Question. Calculate Debtors Turnover Ratio if Closing Debtors are Rs. 40,000; Opening Debtors Rs. 60,000; Cash Sales is 25% of Credit Sales and Total Sales are Rs. 2,00,000.
Solution: Debtors Turnover Ratio = 𝑁𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠/𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑟𝑎𝑑𝑒 𝑑𝑒𝑏𝑡𝑜𝑟𝑠
Cash Sales = 25% of Credit Sales
Let the Credit Sales be Rs. X
Then Cash Sales is 25% of X
Total Sales = Cash Sales + Credit Sales=Rs. 2,00,000
X+25x/100=2,00,00
100x+25x=2,00,000×100
125x= 2,00,00,000 X=2,00,00,000/125=1,60,000
X = Credit Sales=1,60,000 Cash sales=1,60,000×25/100 =40,000
Average Debtors = 60,000+40,000/2 = 1,00,000/2 = 50,000
Debtors Turnover Ratio=1,60,000/50,000 = 3.2 Times

Question. Calculate ‘Debt-Equity Ratio’ from the following information: Total Assets: Rs. 3,50,000; Total Debt: Rs. 2,50,000; Current Liabilities: Rs. 80,000
Solution: Debt Equity Ratio =𝐷𝑒𝑏𝑡/𝐸𝑞𝑢𝑖𝑡𝑦
Debt = Total Debt – Current Liabilities =
Rs. 2,500,000-Rs. 80,000 = Rs. 1,70,000
Equity = Total Assets – Total Debts =
Rs. 3,50,000 – Rs. 2,50,000 = Rs. 1,00,000
Debt – Equity Ratio = 1,70,000/1,00,000 = 1.7:1

Question. From the following information calculate the Inventory Turnover Ratio
Revenue from operations ₹6,00,000; Gross profit 25% on cost; Opening inventory was 1/3rd of closing inventory; Closing Inventory was 30% of revenue from operation.
Solution: Revenue from operation=6,00,00
Cost of revenue from operations= Revenue from operation – Gross profit
Gross Profit=3,00,000×25/125= 60000
Cost of revenue from operations=600000 – 60000=240000
Closing Inventory=90000× 30/100 =₹90,000
Opening Inventory =1/3 ×90000=30000
Inventory turnover Ratio = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝐹𝑟𝑜𝑚 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜/𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
=2,40,000/60,000 = 4 Times

Question. Calculate Interest Coverage Ratio from the following information.
Net Profit (after taxes) = Rs. 1,00,000
Fixed interest charges on long term borrowing = Rs. 20,000
Rate of Income Tax 50%
Solution: Interest coverage Ratio=𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑇𝑎𝑥/𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Profit before interest and tax =Net profit after Tax+ Income Tax + Interest
=1,00,000+1,00,000+20,000=2,20,000
Interest coverage ratio=2,20,000/20,000 = 11 Times

Question. Stock at beginning of the year ₹60,000
Stock at end of the year ₹1,00,000
Stock turnover Ratio ₹ 8 times
Selling Price 25% above cost
Compute Gross profit Ratio and Sales amount 
Solution: Average Stock=𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝑠𝑡𝑜𝑐𝑘+𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝑆𝑡𝑜𝑐𝑘/2 = ₹60,000+₹1,00,000/2 = ₹1,60,000/2 =80,000
Stock turnover Ratio=𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑/𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘
Cost of goods Sold =Average Stock ×Stock turnover ratio
=₹80,000×8= ₹6,40,000
Gross Profit =25% of ₹6,40,000=1,60,000
Sales = Cost of Goods Sold +Gross Profit
= 6,40,000+1,60,000=₹8,00,000
Gross Profit Ratio = 1,60,000/8,00,000 ×100= 20%

Question. Calculate ‘Operating Profit Ration’ and ‘Operating Ratio’ from the following information:
Net Revenue from Operations ₹80,000
Cost of Revenue from Operations ₹60,000
Operating Expenses ₹10,000
Indirect Expenses ₹60,000
Solution: Operating profit Ratio = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡/𝑁𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 ×100
Operating profit = Net Revenue from Operation – Operating Cost
Operating Cost = Cost of Revenue from Operation + Operating Expenses
= Rs. 60,000+10,000 = Rs. 70,000
Operating profit =80,000 -70,000 = Rs. 10,000
Operating profit Ratio = 10,000/80,000 ×100 =12.5%
Operating Ratio = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠/𝑁𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 ×100 or 100- Operating profit ratio
= 60,000+10,000/80,000 ×100 70,000/80,000 ×100=87.5 or 100-12.5=87.5