Accounting Ratios Accountancy - Accounting Ratios

Which of the following transaction change the current ratio?

1. Purchase of goods for cash
2. Plant acquire on account
3. Sold goods on credit
4. Debentures converted into equity capital

An analysis in which the firm's ratio values are compared to those of a key competitor or group of competitors, primarily to identify areas for improvement is called.

1. Time - series analysis.
2. Benchmarking.
3. Combined analysis.
4. None of the above.

Operating ratio is a complementary of ____________.

1. Net profit ratio
2. Price earning ratio
3. Gross profit ratio
4. Pay out ratio

The _____________ ratios provide the information critical to the long-run operation of the firm.

1. Liquidity.
2. Activity.
3. Solvency.
4. Profitability.

Ratio analysis is indispensable part of interpretation of result revealed by the __________.

1. Government statement
2. Accounting statement
3. Financial statement
4. None of the above.

X Ltd. has a current ratio of 3 : 1 and quick ratio of 2 : 1. If the excess of current assets over quick assets as represented by stock is ₹ 40,000, calculate current assets and current liabilities.

O.M. Ltd. has a Current Ratio of 3.5 : 1 and Quick Ratio of 2 : 1. If the excess of Current Assets over Quick Assets as represented by Stock is ₹ 1,50,000, calculate Current Assets and Current Liabilities.

In a company, rate of Gross Profit on cost is 20%. Its Gross Profit is ₹ 4,00,000. Current Liabilities are 50% of the Current Assets, and Current Assets are ₹ 12,00,000. Calculate the Working Capital Turnover Ratio.

Under which major headings/sub-headings will the following items be shown in a Company’s Balance Sheet as per Schedule III Part I of the Companies Act, 2013?

1. Trade Payables
2. Provision for tax
3. Bank Overdraft
4. Goodwill
5. Unclaimed Dividend
6. Loose tools

Under which major head/sub-head will the following items be presented in the Balance Sheet of a company as per Schedule III Part I of the the Companies Act, 2013?

1. Capital Advances
2. Income received in advance
3. Capital work-in-progress
4. Motor vehicles
5. Stores and spare parts
6. 9% Debentures

1. What is meant by activity Ratios'?
2. From the following information calculate inventory turnover ratio; Revenue from operations ₹ 16,00,000; Average Inventory ₹ 2,20,000; Gross Loss Ratio 5%.

The proprietary ratio of M. Ltd. is 0·80 : 1.
State with reasons whether the following transactions will increase, decrease or not change the proprietary ratio:

1. Obtained a loan from bank ₹ 2,00,000 payable after five years.
2. Purchased machinery for cash ₹ 75,000.
3. Redeemed 5% redeemable preference shares ₹ 1,00,000.
4. Issued equity shares to the vendors of machinery purchased for ₹ 4,00,000.

1. The quick ratio of a company is 1.5 : 1. State with reason which of the following transactions would (i) increase; (ii) decrease or (iii) not change the ratio:

1. Paid rent ₹ 3,000 in advance.
2. Trade receivables included a debtor Shri Ashok who paid his entire amount due ₹ 9,700.

2. From the following information compute ‘Proprietary Ratio’:

	₹
Long Term Borrowings	2,00,000
Long Term Provisions	1,00,000
Current Liabilities	50,000
Non-Current Assets	3,60,000
Current Assets	90,000

The Current Ratio of a company is 2·1 : 1·2. State with reasons which of the following transactions will increase, decrease or not change the ratio:

1. Redeemed 9% debentures of ₹ 1,00,000 at a premium of 10%.
2. Received from debtors ₹ 17,000.
3. Issued ₹ 2,00,000 equity shares to the vendors of machinery.
4. Accepted bills of exchange drawn by the creditors ₹ 7,000.

Calculate Gross Profit Ratio from the following data:

Distinguish between Current Ratio and Quiek Ratio.

Comment upon the short-term financial position of the Company on the basis of the following:
Goodwill ₹ 1,00,000; Sundry Debtors ₹ 2,50,000; Machinery ₹ 4,00,000; Inventory ₹ 5,00,000; Bills Payable ₹ 30,000; Sundry Creditors ₹ 4,20,000; Prepaid Expenses ₹ 25,000; Cash ₹ 40,000; Marketable Securities ₹ 80,000; Bills Receivable ₹ 30,000; Debentures ₹ 1,00,000; Expenses Payable ₹ 10,000; Live Stock ₹ 50,000; Patents ₹ 20,000 Provision for Taxation ₹ 40,000.

Calculate Trade Receivables Turnover Ratio in the following:
Case: Cost of Revenue from Operations or Cost of Goods Sold ₹ 4,50,000; Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade Receivables ₹ 90,000; Closing Trade Receivables ₹ 60,000.

Assertion [A] :
If a company has ideal Current Ratio and it further purchased goods on credit, the Current Ratio will decrease.
Reason [R] :
The Ideal Current Ratio of the company is 2:1.
Choose the Correct Option from the following:

Assertion [A] :
Goods sold for Cash at cost price, will not increase the Gross Profit Ratio.
Reason [R] :
Revenue from operation will increase but closing inventory will decrease with the same amount.
Choose the Correct Option from the following:

Assertion [A] :
Debt Equity Ratio of Vinod Ltd. is 2:1. If a Machinery is purchased by the company by issuing 2,00,000 Equity Shares to the Vendors of Machinery, Debt Equity will Decrease.
Reason [R] :
No Change in Debt but Equity is increased.
Choose the Correct Option from the following:

Assertion [A] :
If Current Ratio of a company is 1:1. Its Net working capital will be Zero.
Reason [R]:
When Net Working Capital is Zero, it will reduce the Current Ratio of the Company.
Choose the Correct Option from the following:

Assertion [A] :
If Current Ratio is 2 : 1. Current maturity of long-term debts i.e. Redemption of debentures in the current year, will increase the Current Ratio.
Reason [R]:
Current assets will decrease and there is no impact on current liabilities.
Choose the Correct Option from the following:

Answer the following question from the above information
1.

RVP Ltd. has provided the following information on 31st March 2021:

Net profit before tax: 6,00,000

Salary: 50,000

Loss by fire: 15,000

Printing & Stationery: 10,000

Interest on debenture 40,000

Depreciation: 20,000

Gain on sale of fixed asset: 15,000

Tax rate 20%

Revenue from operation: 20,00,000

Gross Profit ratio will be

(A)0.64
(B)0.2
(C)0.36
(D)0.4
2. Operating Profit ratio will be
(A)0.65
(B)0.68
(C)0.32
(D)0.35
3. Operating ratio will be
(A)0.65
(B)0.35
(C)0.23
(D)0.68
4. Net profit ratio will be
(A)0.2
(B)0.25
(C)0.3
(D)0.24

Answer the following question from the above information
1.

Ridhi Ltd. has provided the following information:

Credit Revenue from operation: 3,00,000.

Cash Revenue from operation: 25% of total revenue from operation

Total purchases during the year: 2,40,000

Cash purchase: 20% of Credit purchase

Excess of closing inventory over opening inventory: 10,000

Carriage Inward: 20,000

Trade receivable turnover ratio: 15 times

Opening debtor was 1/3rd of closing debtor

Average trade payable: 50,000

Cash Revenue of the company will be

(A)3,00,000
(B)4,00,000
(C)2,00,000
(D)1,00,000
2. Credit Purchase of the company will be
(A)40,000
(B)2,00,000
(C)1,60,000
(D)2,40,000
3. Cost of revenue from operation of the company will be
(A)2,00,000
(B)2,50,000
(C)2,40,000
(D)1,60,000
4. Closing trade receivable will be
(A)90000
(B)10000
(C)30000
(D)45000
5. Trade Payable turnover ratio will be
(A)4 Times
(B)3 Times
(C)5 Times
(D)2 Times