CBSE Class 12 Accountancy Accounting Ratios Advanced Questions

Question: Management are interested in
a) Activity Ratios
b) Activity Ratios and Profitability Ratios
c) Profitability Ratios
d) None of the options

Answer : B

Question: Low Current Ratio indicates
a) Business cannot meet short term liability
b) Business can meet long term liability
c) Business cannot meet long term liability
d) Business can meet short term liability

Answer : A

Question: Which ratio indicates the long-term or future solvency position of the business
a) Net Profit Ratio
b) Equity ratio
c) Gross Profit Ratio
d) None of the options

Answer : B

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 machinery for cash
b) Purchase of goods on credit (iii) Sale of furniture at cost
c) Sale of goods at a profit
d) None of the options

Answer : A

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. 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: The excess of Current ratio is also treated as a sign of managerial
a) Inefficiency
b) Efficiency
c) Inefficiency and Efficiency
d) None of the options

Answer : A

Question. Patents and Copyrights fall under the category of:
a) Current Assets
b) Liquid Assets
c) Intangible Assets
d) None of Above

Answer : C

Question: Ratio of Net Sales to Net Working Capital is
a) Working Capital Turnover Ratio
b) Profitability Ratio
c) Liquidity Ratio
d) None of the options

Answer : A

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. 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: Current Ratio is 3:4, Current Liabilities Rs. 24000, the amount of current assets will be
a) Rs 15000
b) Rs 18000
c) Rs 16000
d) Rs 20000

Answer : B

Question: Limitations of Ratio Analysis
a) All of the options
b) Accounting ratios ignore qualitative factors
c) Absence of universally accepted terminology
d) Ratios are affected by window-dressing

Answer : A

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. 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: Collection of debtors
a) Decreases current ratio
b) Increases current ratio
c) Has no effect on current ratio
d) None of the options

Answer : A

Question. Liquid Assets :
a) Current Assets - Prepaid Exp.
b) Current Assets - Inventory + Prepaid Exp.
c) Current Assets - Inventory - Prepaid Exp.
d) Current Assets + Inventory - Prepaid Exp.

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: A low Stock turnover indicates
a) Monopoly situation
b) Over investment in stock
c) Solvency Position
d) None of the options

Answer : B

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. Current Assets Rs.5,00,000; Current Liabilities Rs. 1,00,000; Revenue from Operations Rs.28,00,000. Working Capital turnover Ratio will be:
a) 5.6 times
b) 7 times
c) 8 times
d) 10 times

Answer : B

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_____ratio may indicate the firm is experiencing stock outs and lost sales.
a) Inventory turnover
b) Quick
c) Average collection period
d) None of the options

Answer : B

Question: Proprietary or equity ratio is equal to
a) Shareholders funds/ total assets
b) Shareholders funds+ total assets
c) Shareholders funds- total assets
d) None of the options

Answer : A

Question: Which ratio is considered as safe margin of solvency?
a) Current
b) Liquid ratio
c) Current ratio
d) None of the options

Answer : C

Question: Capital Employed is equal to
a) Fixed Capital+Working Capital
b) Total Assets-Total Liabilities
c) Total Assets
d) Total Liabilities

Answer : A

Question: The ___________ ratios are primarily measures of return.
a) Activity
b) Liquidity
c) Profitability
d) Debt

Answer : A

Question: Which Items Included in Current Assets for get the current ratio
a) All of the options
b) Current investments
c) Current Stock
d) Trade receivables (bills receivable and sundry debtors less provision for doubtful debts)

Answer : A

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

Answer : A

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

Answer : A

Question: Working Capital is equal to
a) Current Assets Current Liabilities
b) Current Assets + Current Liabilities
c) Current Assets/Current Liabilities
d) None of the options

Answer : A

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

Answer : D

Question: Inventory ratio is a relationship between
a) Cost of good sold and cost of average inventory
b) Cost of good Purchased and cost of average inventory
c) Cost of good sold and cost of average inventory and Cost of good Purchased and cost of average inventory
d) None of the options

Answer : A

Question: When ratios are calculated on the basis of accounting information, they are called
a) Accounting ratios
b) Working Capital Ratio
c) Profit ratio
d) None of the options

Answer : A

Question. A Company’s liquid assets are Rs. 10,00,000 and its current liabilities are Rs.8,00,000. Subsequently, it purchased goods for Rs. 1,00,000 on credit. Quick ratio will be ................
a) 1.11:1
b) 1.22:1
c) 1.38 : 1
d) 1.25 : 1

Answer : A

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

Answer : A

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. 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: The solvency position of any firm is determined and measured with the help of
a) Solvency ratios
b) Activity Ratios
c) Profitability Ratios
d) None of the options

Answer : A

Question: Financial ratio analysis are conducted by which groups of analysts
a) All of the options
b) Managers
c) Equity investors
d) Long term creditors

Answer : A

Question. Which ratio is not a part of Solvency Ratio?
a) Current Ratio
b) Debt to Equity Ratio
c) otal Assets to Debt Ratio
d) Proprietary Ratio

Answer : A

Question: Traditional Classification is further divided into the categories
a) All of the options
b) Income Statement Ratios
c) Balance Sheet Ratios
d) Composite Ratios

Answer : A

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

Answer : D

Question. Credit Purchases Rs.9,60,000; Cash Purchases Rs.6,40,000; Creditors Rs.2,40,000; Bills Payable Rs.80,000. Average Payment Period will be :
a) 3 months
b) 4 months
c) 2.4 months
d) 6 months

Answer : B