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Accountancy · Class 12 Commerce

Ch 9Ratio Analysis — Class 12 Accountancy, concept-first.

Ratio Analysis is a technique that expresses the relationship between two related figures drawn from a company's financial statements, in the form of a ratio, percentage, or number of times, so that its financial performance and position can be interpreted quickly and meaningfully.

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Meaning, Objectives, Limitations and Classification of Ratios

Ratio Analysis expresses the relationship between two related financial-statement figures as a ratio, percentage, or number of times, to assess liquidity, solvency, profitability and efficiency, and to aid comparison and…

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Chapter contents

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Meaning, Objectives, Limitations and Classification of Ratios

Ratio Analysis is a technique that expresses the relationship between two related figures drawn from a company's financial statements, in the form of a ratio, percentage, or number of times, so that i…

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Liquidity Ratios

Liquidity Ratios measure a firm's ability to meet its short-term (current) obligations as they fall due, using its current assets.

3

Solvency Ratios

Solvency Ratios measure a firm's ability to meet its long-term obligations and reveal how the firm's assets are financed — through owners' funds or through borrowed (debt) funds.

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Activity (Turnover) Ratios

Activity (Turnover) Ratios measure how efficiently a firm is using its assets — inventory, receivables, payables, and working capital — to generate sales.

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Profitability Ratios

Profitability Ratios measure a firm's overall earning capacity — how much profit it generates from its sales and from the capital invested in it.

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Questions for Practice

This set of questions checks your understanding of the meaning, objectives, limitations and classification of ratios, and the computation of liquidity, solvency, activity/turnover, and profitability r…

Sample & Board Papers

Sample papers and previous-year board questions for this subject.

+Show 26 questions26 questions
  1. Q1Assets that can be converted into cash within a year or within the period of an operating cycle is ________. (a) Tangible assets (b) Fixed a…Preview
  2. Q2Match the following : (1) Current ratio — (i) Liquidity (2) Net profit ratio — (ii) Efficiency (3) Debt-equity ratio — (iii) Long-term solve…Preview
  3. Q3What is liquidity ? What are the types of liquidity ratios ?Preview
  4. Q4Calculate Gross Profit Ratio from the following : Revenue from operations ₹ 2,50,000, cost of revenue from operations ₹ 2,10,000 and purchas…Preview
  5. Q5The mathematical expression that provides a measure of the relationship between two figures is called ________. (a) Model (b) Conclusion (c)…Preview
  6. Q6Current assets excluding inventory and prepaid expenses is called : (a) Funds (b) Reserves (c) Quick assets (d) Tangible assetsPreview
  7. Q7Calculate quick ratio from the following details : Total current liabilities ₹ 2,40,000; Total current assets ₹ 4,50,000; inventories ₹ 70,0…Preview
  8. Q8From the following information calculate debt equity ratio. Balance Sheet (Extract) as on 31.03.2018 | Particulars | ₹ | | --- | --- | | I.…Preview
  9. Q9(a) From the following statement of profit and loss of Mukesh Ltd. Calculate, (i) Gross profit ratio (ii) Net profit ratio Statement of Prof…Preview
  10. Q10Cost of Revenue from operations ₹ 3,00,000; Inventory in the beginning of the year ₹ 60,000; Inventory at the close of the year ₹ 40,000. In…Preview
  11. Q11Debt Equity ratio is a measure of : (a) Profitability (b) Short term solvency (c) Efficiency (d) Long term solvencyPreview
  12. Q12What is Quick Ratio ?Preview
  13. Q13Inventory and Prepaid expenses are not considered as Liquid Assets - State reasons.Preview
  14. Q14Current liabilities ₹ 40,000; Current assets ₹ 1,00,000; Inventory ₹ 20,000. Quick ratio is : (a) 2 : 1 (b) 1 : 1 (c) 1 : 2 (d) 2.5 : 1Preview
  15. Q15To test the liquidity of a concern, which of the following ratios are useful ? (i) Quick ratio (ii) Net profit ratio (iii) Debt-equity ratio…Preview
  16. Q16What is Working Capital ?Preview
  17. Q17Calculate Gross profit ratio from the following. Revenue from operations ₹ 1,00,000. Cost of revenue from operations ₹ 80,000 and Purchases…Preview
  18. Q18From the following information, calculate debt-equity ratio : Balance sheet (Extract) as on 31.03.2018 | Particulars | ₹ | | --- | --- | | I…Preview
  19. Q19Revenue from operations ₹ 4,00,000, Cost of revenue from operations ₹ 1,50,000 Administration expenses ₹ 50,000 and Selling expenses ₹ 8,500…Preview
  20. Q20Match List-I with List-II and select the correct answer using the codes given below. | List-I | List-II | | --- | --- | | (1) Current Ratio…Preview
  21. Q21Calculate Gross Profit ratio from the following : | Particulars | ₹ | | --- | --- | | Revenue from operations | 2,00,000 | | Cost of Revenue…Preview
  22. Q22Calculate the current ratio from the following information. | Particulars | ₹ | | --- | --- | | Current Investments | 40,000 | | Inventories…Preview
  23. Q23The mathematical expression that provides a measure of the relationship between two figures is called : (a) Model (b) Conclusion (c) Decisio…Preview
  24. Q24Debt Equity Ratio is a measure of : (a) Profitability (b) Short term solvency (c) Efficiency (d) Long term solvencyPreview
  25. Q25What is quick ratio ?Preview
  26. Q26From the following information calculate capital gearing ratio : Balance sheet (Extract) as on 31.03.2018 | Particulars | Amount (₹) | | ---…Preview

More questions

+Show 12 questions12 questions
  1. Q1What is meant by Ratio Analysis? State any four of its objectives.Free
  2. Q2State the limitations of Ratio Analysis.Free
  3. Q3How are accounting ratios classified? Explain briefly.Free
  4. Q4From the illustrative Balance Sheet in Section 1 (Current Assets ₹5,00,000, comprising Inventories ₹2,00,000, Trade Receivables ₹1,50,000, C…Preview
  5. Q5What is the significance of the Current Ratio? Why is 2:1 conventionally considered an ideal ratio?Preview
  6. Q6From the illustrative data in Section 1 (Shareholders' Funds ₹8,00,000, 10% Debentures ₹4,00,000, Total Assets ₹14,00,000), calculate the De…Preview
  7. Q7From the illustrative data in Section 1 (Net Profit before Interest and Tax ₹4,00,000; Interest on Debentures ₹40,000), calculate the Intere…Preview
  8. Q8From the illustrative data in Section 1 (Cost of Revenue from Operations ₹14,00,000, Average Inventory ₹1,75,000; Net Credit Revenue from Op…Preview
  9. Q9From the illustrative data in Section 1 (Net Credit Purchases ₹12,00,000, Average Trade Payables ₹1,50,000; Revenue from Operations ₹20,00,0…Preview
  10. Q10From the illustrative Statement of Profit and Loss in Section 1 (Revenue from Operations ₹20,00,000; Gross Profit ₹6,00,000; Cost of Revenue…Preview
  11. Q11From the illustrative data in Section 1 (Net Profit after Tax ₹2,70,000; Revenue from Operations ₹20,00,000; Net Profit before Interest and…Preview
  12. Q12Distinguish between Gross Profit Ratio and Net Profit Ratio. Also briefly explain the significance of Return on Investment.Preview