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![NCERT solutions for Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 chapter 5 - Accounting Ratios - Shaalaa.com](/images/accountancy-company-accounts-and-analysis-of-financial-statements-english-class-12_6:a62c05fff53f436ba0c471c69aa1d89e.jpg "NCERT solutions for Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 chapter 5 - Accounting Ratios")
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Solutions for Chapter 5: Accounting Ratios
Below listed, you can find solutions for Chapter 5 of CBSE NCERT for Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12.
NCERT solutions for Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 5 Accounting Ratios Intext Questions [Pages 198 - 222]
Test your Understanding – I
State whether the following statement is True or False.
The only purpose of financial reporting is to keep the managers informed about the progress of operations.
State whether the following statement is True or False.
Analysis of data provided in the financial statements is termed as financial analysis.
State whether the following statement is True or False.
Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount.
State whether the following statement is True or False.
A ratio is always expressed as a quotient of one number divided by another.
State whether the following statement is True or False.
Ratios help in comparisons of a firm’s results over a number of accounting periods as well as with other business enterprises.
State whether the following statement is True or False.
A ratio reflects quantitative and qualitative aspects of results.
Do it Yourself
Current liabilities of a company are Rs. 5,60,000; the current ratio is 2.5 : 1 and the quick ratio is 2 : 1. Find the value of the Inventories.
Current ratio = 4.5 : 1, quick ratio = 3 : 1. Inventory is Rs. 36,000. Calculate the current assets and current liabilities.
Current assets of a company are Rs. 5,00,000. Current ratio is 2.5 : 1 and Liquid ratio is 1 : 1. Calculate the value of current liabilities, liquid assets and inventories.
Test your Understanding – II
The following groups of ratios are primarily measure risk:
liquidity, activity, and profitability
liquidity, activity, and inventory
liquidity, activity, and debt
liquidity, debt and profitability
The ______ ratios are primarily measures of return.
liquidity
activity
debt
profitability
The ______ of a business firm is measured by its ability to satisfy its short-term obligations as they become due.
Activity
Liquidity
Debt
Profitability
______ ratios are a measure of the speed with which various accounts are converted into revenue from operations or cash.
Activity
Liquidity
Debt
Profitability
The two basic measures of liquidity are ______.
inventory turnover and current ratio
current ratio and liquid ratio
gross profit margin and operating ratio
current ratio and average collection period
The _________ is a measure of liquidity which excludes _______, generally the least liquid asset.
current ratio, trade receivable
liquid ratio, trade receivable
current ratio, inventory
liquid ratio, inventory
Do it Yourself
Calculate the amount of gross profit:
Average inventory = Rs. 80,000
Inventory turnover ratio = 6 times
Selling price = 25% above cost
Calculate Inventory Turnover Ratio:
Annual Revenue from operations = Rs. 2,00,000
Gross Profit = 20% on cost of Revenue from operations
Inventory in the beginning = Rs. 38,500
Inventory at the end = Rs. 41,500
Test your Understanding – III
The ______ is useful in evaluating credit and collection policies.
Average Payment Period
Current Ratio
Average Collection Period
Current Assets Turnover
The ______ measures the activity of a firm's inventory.
average collection period
inventory turnover
liquid ratio
current ratio
The ______ may indicate that the firm is experiencing stock outs and lost sales.
Average payment period
Inventory turnover ratio
Average collection period
Quick ratio
ABC Co. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was ______.
30 days
36 days
47 days
37 days
______ are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm.
Customers
Stockholders
Lenders and suppliers
Borrowers and buyers
The ______ ratios provide the information critical to the long run operation to the firm.
liquidity
activity
solvency
profitability
NCERT solutions for Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 5 Accounting Ratios Questions for Practice [Pages 234 - 240]
Short Answer Question
What do you mean by Ratio Analysis?
Short Answer Question
What are the various types of ratios?
What relationship will be established to study:
Inventory Turnover
What relationship will be established to study:
Trade Receivables Turnover
What relationship will be established to study:
Trade payables turnover
What relationship will be established to study:
Working Capital Turnover
Short Answer Question
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?
Short Answer Question
The average age of inventory is viewed as the average length of time inventory is held by the firm for which explain with reasons.
Long Answer Questions
What are liquidity ratios?
Discuss the importance of the current ratio.
Discuss the importance of the liquid ratio.
Long Answer Question
How would you study the solvency position of the firm?
Long Answer Question
What are important profitability ratios? How are these worked out?
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.
Numerical Questions
Following is the Balance Sheet of Raj Oil Mills Limited as at March 31, 2017. Calculate Current Ratio.
| Particulars | (Rs) |
| I. Equity and Liabilities: | |
|
1. Shareholders’ funds |
|
|
a) Share capital |
7,90,000 |
|
b) Reserves and surplus |
35,000 |
|
2. Current Liabilities |
|
|
a) Trade Payables |
72,000 |
| Total | 8,97,000 |
| II. Assets | |
|
1. Non-current Assets |
|
|
a) Fixed assets |
|
|
Tangible assets |
7,53,000 |
|
2. Current Assets |
|
|
a) Inventories |
55,800 |
|
b) Trade Receivables |
28,800 |
|
c) Cash and cash equivalents |
59,400 |
| Total | 8,97,000 |
Following is the Balance Sheet of Title Machine Ltd. as at March 31, 2017.
| Particulars |
Amount Rs. |
| I. Equity and Liabilities | |
|
1. Shareholders’ funds |
|
|
a) Share capital |
24,00,000 |
|
b) Reserves and surplus |
6,00,000 |
|
2. Non-current liabilities |
|
|
a) 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 |
|
|
a) Fixed assets |
|
|
Tangible assets |
45,00,000 |
|
2. Current Assets |
|
|
a) Inventories |
12,00,000 |
|
b) Trade receivables |
9,00,000 |
|
c) Cash and cash equivalents |
2,28,000 |
|
d) Short-term loans and advances |
72,000 |
| Total | 69,00,000 |
Calculate Current Ratio and Liquid Ratio.
Current Ratio is 3.5 : 1. Working Capital is Rs 90,000. Calculate the amount of Current Assets and Current Liabilities.
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.
Current liabilities of a company are Rs 75,000. If current ratio is 4:1 and liquid ratio is 1:1, calculate value of current assets, liquid assets and inventory.
Handa Ltd.has inventory of Rs 20,000. Total liquid assets are Rs 1,00,000 and quick ratio is 2:1. Calculate current ratio.
Calculate debt equity ratio from the following information:
|
|
Rs |
|
Total Assets |
15,00,000 |
|
Current Liabilities |
6,00,000 |
|
Total Debts |
12,00,000 |
Calculate Current Ratio if:
Inventory is Rs 6,00,000; Liquid Assets Rs 24,00,000; Quick Ratio 2:1.
Compute the Inventory Turnover Ratio from the following information:
| Rs. | |
| 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 |
Calculate the following ratios from the following information:
- Current ratio
- Liquid ratio
- Operating Ratio
- Gross Profit Ratio
| Rs. | |
| Current Assets | 35,000 |
| Current Liabilities | 17,500 |
| Inventory | 15,000 |
| Operating Expenses | 20,000 |
| Revenue from Operations | 60,000 |
| Cost of Revenue from Operations | 30,000 |
From the following information, calculate:
- Gross Profit Ratio
- Inventory Turnover Ratio
- Current Ratio
- Liquid Ratio
- Net Profit Ratio
- Working Capital Ratio
| Rs. | |
| 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 |
Compute Working Capital Turnover Ratio, Debt Equity Ratio and Proprietary Ratio from the following information:
| Rs. | |
| 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 |
Calculate the Inventory Turnover Ratio if:
Inventory in the beginning is Rs. 76,250, Inventory at the end is Rs. 98,500, Sales is Rs. 5,20,000, Sales Return is Rs. 20,000, Purchases is Rs. 3,22,250.
Calculate Inventory Turnover Ratio from the data given below:
|
|
Rs |
|
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 |
A trading firm’s average inventory is Rs 20,000 (cost). If the inventory turnover ratio is 8 times and the firm sells goods at a gross profit of 20% on sale, ascertain the gross profit of the firm.
You are able to collect the following information about a company for two years:
| 2015-16 | 2016-17 | |
| Trade receivables on Apr. 01 | Rs. 4,00,000 | Rs. 5,00,000 |
| Trade receivables on Mar. 31 | Rs. 5,60,000 | |
| Stock in trade on Mar. 31 | Rs. 6,00,000 | Rs. 9,00,000 |
| Revenue from operations (Gross profit is 25% on cost of Revenue from operations) |
Rs. 3,00,000 | Rs. 24,00,000 |
Calculate Inventory Turnover Ratio and Trade Receivables Turnover Ratio.
From the following Balance Sheet and other information, calculate the following ratios:
- Debt-Equity Ratio
- Working Capital Turnover Ratio
- Trade Receivables Turnover Ratio
| Balance Sheet as at March 31, 2017 | ||
| Particulars | Note No. | Rs. |
| I. Equity and Liabilities: | ||
| 1. Shareholders’ 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 | ||
| Trade payables | 5,00,000 | |
| Total | 36,00,000 | |
| II. Assets | ||
| 1. Non-current Assets | ||
| a) Fixed assets | ||
| Tangible assets | 18,00,000 | |
| 2. Current Assets | ||
| a) Inventories | 4,00,000 | |
| b) Trade Receivables | 9,00,000 | |
| c) Cash and cash equivalents | 5,00,000 | |
| Total | 36,00,000 | |
Additional Information: Revenue from Operations Rs. 18,00,000
From the following information, calculate the following ratios:
- Liquid Ratio
- Inventory Turnover Ratio
- Return on Investment
| Rs. | |
| 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 and 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)
From the following, calculate (a) Debt Equity Ratio (b) Total Assets to Debt Ratio (c) Proprietary Ratio.
| Rs. | |
| Equity Share Capital | 75,000 |
| Share application money pending allotment | 25,000 |
| General Reserve | 45,000 |
| Balance in the Statement of Profits and Loss | 30,000 |
| Debentures | 75,000 |
| Trade Payables | 40,000 |
| Outstanding Expenses | 10,000 |
Cost of Revenue from Operations is Rs 1,50,000. Operating expenses are Rs 60,000. Revenue from Operations is Rs 2,50,000. Calculate Operating Ratio.
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
| Rs. | |
| Gross Profit | 50,000 |
| Revenue from Operations | 100,000 |
| Inventory | 15,000 |
| Trade Receivables | 27,500 |
| Cash and Cash Equivalents | 17,500 |
| Current Liabilities | 40,000 |
| Land & Building | 50,000 |
| Plant & Machinery | 30,000 |
| Furniture | 20,000 |
From the following information calculate Gross Profit Ratio, Inventory Turnover Ratio and Trade Receivables Turnover Ratio.
| Rs | |
| 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 |
Solutions for 5: Accounting Ratios
NCERT solutions for Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 chapter 5 - Accounting Ratios
Shaalaa.com has the CBSE Mathematics Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 CBSE solutions in a manner that help students grasp basic concepts better and faster. The detailed, step-by-step solutions will help you understand the concepts better and clarify any confusion. NCERT solutions for Mathematics Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 CBSE 5 (Accounting Ratios) include all questions with answers and detailed explanations. This will clear students' doubts about questions and improve their application skills while preparing for board exams.
Further, we at Shaalaa.com provide such solutions so students can prepare for written exams. NCERT textbook solutions can be a core help for self-study and provide excellent self-help guidance for students.
Concepts covered in Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 chapter 5 Accounting Ratios are Concept of Ratio Analysis, Classification of Ratios, Liquidity Ratios, Current Ratios/Working Capital Ratios, Quick Ratio/Acid Test Ratio/Liquid Ratio, Solvency Ratios, Debt to Equity Ratio, Debt to Total Assets Ratio, Proprietary Ratio, Total Assets to Debt Ratio, Interest Coverage Ratio, Activity Ratios, Inventory Turnover Ratio, Trade Receivables Turnover Ratio, Trade Payables Turnover Ratio, Capital Employed Turnover Ratio, Profitability Ratios, Operating Profit Ratio, Return on Investment, Return on Shareholders’ Funds, Earnings Per Share, Book Value Per Share, Dividend Payout Ratio, Price Earnings Ratio, Gross Profit Ratio, Net Profit Ratio, Operating Ratio.
Using NCERT Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 solutions Accounting Ratios exercise by students is an easy way to prepare for the exams, as they involve solutions arranged chapter-wise and also page-wise. The questions involved in NCERT Solutions are essential questions that can be asked in the final exam. Maximum CBSE Accountancy Company Accounts and Analysis of Financial Statements [English] Class 12 students prefer NCERT Textbook Solutions to score more in exams.
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