CBSE Class 12 Accountancy Ratio Analysis Worksheet Set B

Question: Test of solvency of a business undertaking means ………
a) Its ability to meet the interest costs
b) Its ability to meet the long-term liabilities as and when they become due
c) Its ability to pay dividends to equity shareholders
d) All of the above
Answer: d

Question: Assertion (A) Personal bias can be reflected in ratio analysis.
Reason (R) Different people may interpret the same ratio in different ways, which affects its trustability.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason (R) is false
d) Assertion (A) is false, but Reason (R) is true
Answer: a

Question: Assertion (A) Current ratio is computed to assess the short-term financial position of the enterprise.
Reason (R) Current ratio explains the relation between long-term assets and current liabilities of a business.
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason (R) is false
d) Assertion (A) is false, but Reason (R) is true
Answer: c

Question: Ratio analysis under financial analysis is significant as it ………
a) Ignores qualitative factors
b) Helps in window dressing
c) Does not require any standards
d) Helps in locating weak points of the firm
Answer: d

Question: Total purchase ₹ 1,70,000, cash purchases ₹ 16,000, purchase return ₹ 8,000, creditors at the end of the year ₹ 32,000, creditors in the beginning ₹ 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

Question: Find out the trade payable turnover ratio using the following information: Credit purchase ₹ 6,00,000, Opening creditors ₹ 1,00,000, Closing creditors ₹ 50,000
a) 12 times
b) 8 times
c) 4 times
d) 6 times
Answer: b 

ASSERTION REASON QUESTIONS

Question: Change in profit sharing ratio does not change the relationship among the existing partners.
Reason: Change in profit sharing ratio leads to dissolution of partnership.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: d

Question: Workmen Compensation Claim in excess of Workmen Compensation Reserve is debited to Revaluation Account.
Reason: The loss will be borne by all the partners in their new profit sharing ratio.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: c

Question: Reserves cannot appear at the same amount in the Balance Sheet of the reconstituted firm.
Reason: Reserves are to be distributed among partners in their old ratio.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: d

Question: Investments are recorded in the books of the firm at cost.
Reason: Market value of investment may be equal to or lower or higher than its book value.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: b

Question: Firm is reconstituted in the event of change in profit sharing ratio among the existing partners only.
Reason: Any change in existing agreement of partnership is reconstitution of the firm.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: d

Question: Unrecorded assets are credited to revaluation account.
Reason: Increase in value of asset is gain.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: a

Question: The partners whose profit shares have increased as result of change in profit sharing ratio are known as gaining partners.
Reason: Gaining ratio = new ratio – old ratio
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: a

Question: Increase in value of assets and decrease in amount of liabilities are credited to revaluation account.
Reason: Revaluation is a nominal account.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: a

Question: Workmen compensation reserve is created out of firms’ profit to meet possible liability on account of compensation to employees, if it arises.
Reason: Workmen compensation reserve existing in balance sheet against which no liabilities exists, is transferred to capital accounts of partners in their sacrificing ratio.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: c

Question: Reserves and accumulated profits and losses will continue to be shown at their old values in balance sheet of new firm.
Reason: Reserves and Accumulated profits and losses are adjusted through Partners’ Capital A/C.
a) Both A and R are correct and R is the correct explanation of A
b) Both A and R are correct but R is not the correct explanation of A
c) A is correct but R is wrong
d) A is wrong but R is correct
Answer: a

CASE STUDY BASED QUESTIONS

Cash revenue from Operations Rs. 1,00,000; Credit Revenue from Operations Rs. 3,00,000. Gross profit 30% on Revenue from Operations; Inventory turnover Ratio = 2 times. If the opening Inventory is 75% of Closing Inventory and Closing Inventory is 30% of Revenue from Operations

Question: Find Average Inventory?
a) Rs. 2,00,000
b) Rs. 60,000
c) Rs. 1,05,000
d) Rs. 1,50,000
Answer: c

Question: Calculate the cost of Revenue from Operations?
a) Rs. 3,00,000
b) Rs. 1,20,000
c) Rs. 4,00,000
d) Rs. 2,80,000
Answer: d

Question: Find the opening inventory and closing inventory if opening inventory is 75% of closing inventory and closing inventory is 30% of revenue from operations.
a) Rs. 90,000 & Rs. 1,20,000
b) Rs. 1,20,000 & Rs. 90,000
c) Rs. 3,00,000 & Rs. 1,00,000
d) Rs. 1,00,000 & Rs. 2,00,000
Answer: a

Question: What is effect of increase in value of closing inventory by Rs. 20,000, If the inventory turnover ratio is three times?
a) Increase
b) Decrease
c) Neither increase nor decrease
d) May or may not increase
Answer: b

Question: Find Average Collection Period?
a) 3 months
b) 4 months
c) 2 months
d) 3.5 months
Answer: a

Question: How much is Credit Revenue from Operations?
a) Rs. 3,75,000
b) Rs. 3,00,000
c) Rs. 1,50,000
d) Rs. 75,000
Answer: b

Question: Calculate Average Payable Period?
a) 56 days
b) 73 days
c) 66 days
d) 69 days
Answer: b

Question: Find Trade Payable Turnover Ratio?
a) 6.5 times
b) 5.5 times
c) 5 times
d) 5.25 times
Answer: c 

Read the following and answer the questions give below:
                                                  2019-20                   2020-21
                                                Rs.                            Rs.
Inventory on 31^st March      7,00,000                       17,00,000
Revenue from Operations     50,00,000                 75,00,000
Gross profit 25% on cost of revenue from operations
In the year 2019-20, inventory increased by Rs.2,00,000

Question: Find cost of revenue from operations for the year 2020-21?
a) Rs. 40,00,000
b) Rs. 50,00,000
c) Rs. 75,00,000
d) Rs. 60,00,000
Answer: d

Question: Calculate inventory turnover ratio for the year 2019-20?
a) 6.07 times
b) 6.67 times
c) 5 times
d) 8.33 times
Answer: b

Question: Which year’s inventory ratio is better for the above firm?
a) 2019-20
b) 2020-21
c) Both are equal
d) Neither 2019-20 nor 2020-21
Answer: a

Question: Inventory turnover ratio is a part of
a) Solvency ratio
b) Liquidity ratio
c) Activity ratio
d) Profitability ratio
Answer: c 

Sterling Enterprises is a partnership business with Ryan, Williams and Sania as partners engaged in production and sales of electrical items and equipment.
Their capital contributions were ₹ 50,00,000, ₹ 50,00,000 and ₹ 80,00,000 respectively with profit sharing ratio of 5:5:8. As they are now looking forward to expanding their business, it was decided that they would bring in sufficient cash to double their respective capitals.
This was duly followed by Ryan and Williams, but due to unavoidable reasons Sania could not do so and ultimately it was agreed that to bridge the shortfall in the required capital a new partner should be admitted who would bring in the amount that Sania could not bring and that the new partner would get share of profits equal to half of Sania’s share which would be sacrificed by Sania only.
Consequent to this agreement Ejaz was admitted and he brought in the required capital and ₹ 30,00,000 as premium for goodwill. Based on the above information you are required to answer the following questions.

Question: What is the amount of capital brought in by the new partner Ejaz?
a) ₹ 50,00,000
b) ₹ 80,00,000
c) ₹ 40,00,000
d) ₹ 30,00,000
Answer: b

Question: What is the value of the goodwill of the firm?
a) ₹ 1,35,00,000
b) ₹ 30,00,000
c) ₹ 1,50,00,000
d) Cannot be determined from the given data
Answer: a

Question: What will be the new profit sharing ratio of Ryan, Williams, Sania and Ejaz?
a) 1:1:1:1
b) 5:5:8:8
c) 5:5:4:4
d) None of these
Answer: c