NCERT Solutions for Class 12 Accountancy Chapter 5 Accounting Ratios

Q:

From the following information, Calculate Gross profit ratio, Inventory Turnover Ratio and Trade Receivables Ratio. Revenue from Operations: ₹3,00,000 Cost of Revenue from Operations: ₹2,40,000 Inventory at the end: ₹62,000 Gross Profit: ₹60,000 Inventory in the beginning: ₹58,000 Trade Receivables: ₹32,000

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Q:

Calculate the following ratio on the basis of following information: (i) Gross Profit Ratio (ii) Current Ratio (iii) Acid Test Ratio (iv) Inventory Turnover Ratio (v) Fixed Assets Turnover Ratio Gross profit: ₹50,000 Revenue from Operations: ₹1,00,000 Inventory: ₹15,000 Trade Receivables: ₹27,500 Cash & Cash Equivalents: ₹17,500 Current Liabilities: ₹40,000 Land & Building: ₹50,000 Plant & Machinery: ₹30,000 Furniture: ₹20,000

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Q:

Cost of Revenue from Operations is ₹1,50,000. Operating expenses are ₹60,000. Revenue from Operations is ₹2,50,000. Calculate Operating Ratio.

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Q:

From the following, calculate (a) Debt-equity Ratio (b) Total Assets to Debt Ratio (c) Proprietary Ratio.
Equity Share Capital: ₹75,000
Share application money pending allotment ₹25,000
General Reserve: ₹45,000
Balance in the Statement of Profit & Loss: ₹30,000
Debentures: ₹75,000
Trade Payables: ₹40,000
Outstanding Expenses: ₹10,000

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Q:

From the following information, calculate the following ratios:
(i) Liquid Ratio
(ii) Inventory turnover ratio
(iii) Return on investment

Inventory in the beginning: ₹50,000
Inventory at the end: ₹60,000
Net profit = ₹2,17,900
10% Debentures = ₹2,50,000
Revenue from operations: ₹4,00,000
Gross Profit: ₹1,94,000
Cash & Cash Equivalents: ₹40,000
Money received against share warrants = ₹20,000
Trade Receivables: ₹1,00,000
Trade Payables: ₹1,90,000
Other Current Liabilities: `70,000
Share Capital: ₹2,00,000
Reserves and Surplus: ₹1,20,000
(Balance in the Statement of Profit & Loss)

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Q:

From the following Balance Sheet and other Information, Calculate following ratios: (i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) Trade Receivables Turnover Ratio
Balance Sheet as at March 31, 2017
Particulars
I. Equity and Liabilities:
1.Shareholder’s funds
a) Share capital 10,00,000
b) Reserves and surplus 7,00,000
c) Money received against share warrants 2,00,000
2. Non-Current Liabilities
Long term borrowings 12,00,000
3. Current liabilities
a) Trade payables 5,00,000
Total 36,00,000
II. Assets
1. Non-current Assets
Fixed assets
Tangible assets 18,00,000
2. Current Assets
  1. Inventories
4,00,000
  1. Trade Receivables
9,00,000
  1. Cash & cash equivalents
5,00,000
Total 36,00,000
Additional Information:
Revenue from Operations: ₹18,00,000

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Q:

You are able to collect the following information about a company for two years:
Particulars 2015-16 2016-2017
Trade receivables on Apr. 01 4,00,000 5,00,000
Trade receivables on Mar. 31 5,60,000
Stock in trade on Mar. 31 6,00,000 9,00,000
Revenue from operations (at gross profit of 25%) 3,00,000 24,00,000
Calculate Inventory Turnover Ratio and Trade Receivables Turnover Ratio.

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Q:

A trading firm’s average inventory is ₹20,000 (cost). If the inventory turnover ratio is 8 times and the firm sells goods at a Gross profit of 20% on sales, ascertain the Gross profit of the firm.

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Q:

Calculate Inventory Turnover ratio from the data given below:
Inventory in the beginning of the year: ₹10,000
Inventory at the end of the year: ₹5,000
Carriage: ₹2,500
Revenue from Operations: ₹50,000
Purchases: ₹25,000

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Q:

Calculate Inventory Turnover Ratio if : Inventory in the beginning is ₹76,250. Inventory at the end is ₹98,500. Sales is ₹5,20,000. Sales Return is ₹20,000, Purchases is ₹3,22,250.

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Q:

Compute Working Capital Ratio, Debt Equity Ratio and Proprietary Ratio from the following information:
Paid-up Share Capital: ₹5,00,000
Current Assets: ₹4,00,000
Revenue from Operations: ₹10,00,000
13% Debentures: ₹2,00,000
Current Liabilities: ₹2,80,000

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Q:

From the following information calculate:
(i) Gross Profit Ratio
(ii) Inventory Turnover Ratio
(iii) Current Ratio
(iv) Liquid Ratio
(v) Net Profit Ratio
(vi) Working Capital Ratio:

Revenue from Operations: ₹25,20,000
Net Profit: ₹3,60,000
Cost of Revenue from Operations: ₹19,20,000
Long-term Debts: ₹9,00,000
Trade Payables: ₹2,00,000
Average Inventory: ₹8,00,000
Liquid Assets: ₹7,60,000
Fixed Assets: ₹14,40,000
Current Liabilities: ₹6,00,000
Net Profit before interest and Tax: ₹8,00,000

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Q:

Calculate following ratios from the following information: (i) Current Ratio (ii) Liquid Ratio (iii) Operating Ratio (iv) Gross Profit Ratio Current Assets: ₹35,000 Current Liabilities: ₹17,500 Inventory: ₹15,000 Operating Expenses: ₹20,000 Revenue from Operations: ₹60,000 Cost of Revenue from operation: ₹30,000

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Q:

Compute Inventory Turnover Ratio from the following information: Net Revenue from Operations: ₹2,00,000 Gross Profit: ₹50,000 Inventory at the end: ₹60,000 Excess of inventory at the end over inventory in the beginning: ₹20,000

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Q:

Calculate Current Ratio if: Inventory is ₹6,00,000; Liquid Assets ₹24,00,000; Quick Ratio 2:1.

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Q:

Calculate debt-equity ratio from the following information: Total Assets: ₹15,00,000 Current Liabilities: ₹6,00,000 Total Debts: ₹12,00,000

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Q:

Handa Ltd. has inventory of ₹20,000, Total liquid assets are ₹1,00,000 and quick ratio is 2:1. Calculate current ratio.

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Q:

Current Liabilities of a company are ₹75,000. If Current ratio is 4:1 and Liquid Ratio is 1:1, Calculate value of current assets, liquid assets and inventory.

A:

Current ratio = 4:1

Liquid ratio = 1:1

Current liabilities = ₹75,000

Then liquid assets = ₹75,000

Current assets = ₹75,000 x 4 = ₹3,00,000

Inventory = Current assets – Liquid assets

= ₹3,00,000 – ₹75,000 = ₹2,25,000

Q:

Shine Limited has a current ratio 4.5:1 and quick ratio 3:1; if the inventory is ₹36,000. Calculate Current Liabilities and Current Assets.

A:

Current ratio = 4.5:1

Quick ratio = 3:1

Let current liabilities = X

Then current assets = 4.5X

Current liabilities = 3X

Inventory = 4.5X – 3X = 1.5X

1.5X = ₹36,000

X = Current liabilities = ₹24,000

Current assets = ₹24,000 x 4.5 = ₹1,08,000

Q:

Current Ratio is 3.5:1. Working Capital is ₹90,000. Calculate the amount of Current Assets and Current Liabilities.

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Q:

Following is the Balance Sheet of Title Machine Ltd. as at March 31, 2017.
Particulars
I. Equity and Liabilities:
1.Shareholder’s funds
a) Share capital 24,00,000
b) Reserves and surplus 6,00,000
2. Non-Current Liabilities
Long term borrowings 9,00,000
3. Current liabilities
a) Short-term borrowings 6,00,000
b) Trade payables 23,40,000
c) Short-term provisions 60,000
Total 69,00,000
II. Assets
1. Non-current Assets
Fixed assets
Tangible assets 45,00,000
2. Current Assets
  1. Inventories
12,00,000
  1. Trade Receivables
9,00,000
  1. Cash & cash equivalents
2,28,000
  1. Short-term loans & advances
72,000
Total 69,00,000
Calculate Current Ratio and Liquid Ratio.

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Q:

What do you mean by Ratio Analysis?

A:

Ratio analysis refers to a technique of analysing the financial statements by computing various types of ratios. In other words, it is a process of determining and interpreting relationship between the items of financial statements to provide a meaningful result of the performance and financial position of a business.

Q:

Following is the Balance Sheet of Raj Oil Mills Limited as at March 31, 2017. Calculate current ratio.
Particulars
I. Equity and Liabilities:
1.Shareholder’s funds
a) Share capital 7,90,000
b) Reserves and surplus 35,000
2. Current Liabilities
Trade Payables 72,000
Total 8,97,000
II. Assets
1. Non-current Assets
Fixed assets
Tangible assets 7,53,000
2. Current Assets
  1. Inventories
55,800
  1. Trade Receivables
28,800
  1. Cash & cash equivalents
59,400
Total 8,97,000

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Q:

What are various profitability ratios? How are these worked out?

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Q:

The current ratio provides a better measure of overall liquidity only when a firm’s inventory cannot easily be converted into cash. If inventory is liquid, the quick ratio is a preferred measure of overall liquidity. Explain.

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Q:

The average age of inventory is viewed as the average length of time inventory is held by the firm for which explain with reasons.

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Q:

The liquidity of a business firm is measured by its ability to satisfy its long-term obligations as they become due. What are the ratios used for this purpose?

A:

Yes, it is true that the liquidity of a business firm is measured by its ability to pay its long term obligations as they become due. Here the long term obligation means payments of principal amount on the due date and payment of interest on the regular basis. For measuring the long term solvency of any business we calculate the following ratios:

  1. Debt-equity ratio
  2. Total assets to debt ratio
  3. Proprietary ratio and
  4. Interest coverage ratio

Q:

What relationships will be established to study?
  1. Inventory turnover
  2. Trade receivables turnover
  3. Trade payables turnover
  4. Working capital turnover.

A:

  1. Inventory turnover ratio establishes relationship between Cost of Revenue from Operations and Average Inventory.
  2. Trade receivables turnover ratio establishes relationship between Net Credit Revenue from Operations and Average Trade Receivables.
  3. Trade payable turnover ratio indicates the relationship between credit purchases and average trade payables.
  4. Working capital turnover ratio establishes relationship between Revenue from Operations and Working Capital.

Q:

What are various types of ratios?

A:

Accounting ratios are classified as follows:

  1. Profitability Ratios: They include Gross Profit Ratio, Net Profit Ratio, Operating Ratio, Operating Profit Ratio and Return on Investment Ratio.
  2. Turnover or Performance or Activity Ratios: These ratios comprise Inventory Turnover Ratio, Trade Receivables Turnover Ratio, Trade Payables Turnover Ratio and Working Capital Turnover Ratio. 
  3. Solvency Ratios: They include Debt Equity Ratio, Total Assets to Debt Ratio, Proprietary Ratio and Interest Coverage Ratio.
  4. Liquidity Ratios: These ratios consist of Current Ratio and Liquid Ratio.

Q:

How would you study the Solvency position of the firm?

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Q:

What are liquidity ratios? Discuss the importance of current and liquid ratio.

A:

To meet its commitments, business needs liquid funds. The ability of the business to pay the amount due to stakeholders as and when it is due is known as liquidity, and the ratios calculated to measure it are known as ‘Liquidity Ratios’. These ratios are calculated to measure the short-term solvency of the business, i.e. the firm’s ability to meet its current obligations. Liquidity ratios include current ratio and liquid ratio.

Current Ratio: It indicates the amount of current assets available for repayment of current liabilities. Higher the ratio, the greater is the short term solvency of a firm and vice a versa. However, a very high ratio or very low ratio is a matter of concern. If the ratio is very high it means the current assets are lying idle. Very low ratio means the short term solvency of the firm is not good. Thus, the ideal current ratio of a company is 2:1 i.e. to repay current liabilities; there should be twice current assets.

Liquid ratio: This ratio establishes a relationship between liquid assets and current liabilities. Liquid ratio is a measure of the instant debt paying capacity of the business enterprise. It is a measure of the extent to which liquid resources are immediately available to meet current obligations. A quick ratio of 1:1 is considered good/favourable for a company. For the purpose of calculating this ratio, inventory and prepaid expenses are not taken into account as these may not be converted into cash in a very short period.

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Tips & Strategies for Class 12 Exam Preparation

1. Start with making a time table. Prioritize the important topics and study them well.

2. Class 12 is important for your career, therefore follow your time table religiously.

3. Always make brief notes while studying a chapter as they will come in handy for revision before the exam.

4. Understand your concepts, diagrams etc. with NCERT Solutions given on the Extramarks website and the Extramarks – The Learning App.

5. Most importantly, be confident.

Why Opt for Extramarks NCERT Solutions for Class 12 ?

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Frequently Asked Questions

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How to study for the Class 12 Maths CBSE exam? 

Math is a subject that analyses the critical and analytical thinking of a student and tests numerical questions. So, the best way to prepare for Math is by studying the NCERT solutions. Make a timetable, jot down the important formulas, and theorems, make time for revision and give as much time as you can give to practicing questions. Solve a maximum number of questions and time your efforts. Extramarks - The Learning App has several sample papers along with NCERT 12 solutions that can be used for practicing for class 12 Math exam.

How to Prepare for Class 12 Board Exams?

Class 12 exams seem like a major feat, but they are actually quite simple and really just a milestone that every student cross in his/her academic life. There is nothing to fear as you can easily prepare for the exams with the help of NCERT solutions for class 12 that are given on the Extramarks website or Extramarks – The Learning App

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What are some expert tips to score good marks in Class 12 CBSE?

To score good marks in class 12 CBSE board exams, you must follow these tips:

1. Make a timetable to study well. Organize and prioritize the topics you want to study and haven`t yet had the time to open. Start studying with the most crucial topics.

2. Follow your timetable religiously. Save time for relaxing activities like meditation, swimming or sleeping.

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4. Learn from class 12 NCERT solutions given on Extramarks website.

5. Be confident that you can crack these exams and take time off to relax.

6. Revise thoroughly before the exam.

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