Accounting Ratios Class 12 MCQ Questions with Answers are covered in this Article. Accounting Ratios Class 12 MCQ Test contains 46 questions. Answers to MCQ on Accounting Ratios Class 12 Accountancy are available at the end of the last question. These MCQ have been made for Class 12 students to help check the concept you have learnt from detailed classroom sessions and application of your knowledge.
Accounting Ratios Class 12 MCQ Questions with Answers
1.On the basis of the following information calculate the current ratio.
| Particulars | Amount |
| Inventory | 2,00,000 |
| Trade Receivables | 3,00,000 |
| Prepaid Expenses | 1,50,00 |
| Current Investment | 80,000 |
| Advanced Tax | 70,000 |
| Bank Overdraft | 30,000 |
| Trade Payables | 1,50,000 |
| Other Current Liabilities | 20,000 |
(a) 6 : 3
(b) 4 : 1
(c) 5 : 4
(d) None of these
Answer
Answer: (b) 4 : 1
Explanation: Current Ratio = Current Assets/Current Liabilities
= 8,00,000/2,00,000= 4 : 1
Working note 1 :
Current assets = Inventory + Trade receivable + Current investment + Prepaid expenses + Advance tax
Current assets = 2,00,000 + 3,00,000 + 80,000 + 1,50,000 + 70,000
Current assets = 8,00,000
Working note 2 :
Current liabilities = Bank overdraft + Trade payables + Other current liabilities
Current liabilities = 30,000 + 1,50,000 + 20,000
Current liabilities = 2,00,000
2.On the basis of the following information calculate the Quick ratio:
| Particulars | Amount |
| Inventory | 22,000 |
| Trade Receivables | 45,000 |
| Prepaid Expenses | 56,000 |
| Current Investment | 53,000 |
| Advanced Tax | 44,000 |
| Bank Overdraft | 30,000 |
| Unearned Revenue | 25,000 |
| Provision for Tax | 15,000 |
(a) 4.45 : 3
(b) 2.45 : 1
(c) 5 : 4
(d) None of the above
Answer
Answer: (b) 2.45 : 1
Explanation: Quick Ratio = (Current Assets – Inventory)/(Current Liabilities – Bank Overdraft)
Or
= (Liquid Assets)/(Liquid Liabilities)
Quick Ratio = 98,000/40,000= 2.45 : 1
Working note 1 :
Liquid assets = Current assets (-) ( Stock + Prepaid expenses + Advance tax )
Liquid assets = 220000 (-) 22000 + 56000 + 44000
Liquid assets = 98000
Working note 2 :
Quick liabilities = Current liabilities (-) Bank overdraft
Quick liabilities = 70000 (-) 30000
Quick liabilities = 40000
3.On the basis of the following information calculate the liquidity ratio:
| Particulars | Amount |
| Inventory | 1,29,000 |
| Trade Receivables | 2,12,000 |
| Current Investment | 28,000 |
| Prepaid Expenses | 45,000 |
| Advanced Tax | 60,000 |
| Bank Overdraft | 60,000 |
| Unearned Revenue | 45,000 |
| Short Term Borrowings | 95,000 |
(a) 5 : 4
(b) 3.2 : 3
(c) 1.2 : 1
(d) None of the above
Answer
Answer: (c) 1.2 : 1
Explanation: Liquidity Ratio = Quick Assets/ Current Liabilities
= 2,40,000/2.00,000= 1.2 :1
Working note 1 :
Liquid assets = Current assets (-) ( Stock + Prepaid expenses + Advance tax )
Liquid assets = 474000 (-) 129000 + 45000 + 60000
Liquid assets = 240000
Working note 2 :
Current liabilities = Bank overdraft + unearned revenue + Short term borrowings
Current liabilities = 60000 + 45000 + 95000
Current liabilities = 200000
4.From the following information compute the current ratio.
| Particulars | Amount |
| Working Capital | 12,00,000 |
| Total Debt | 4,45,000 |
| Long Term Debt | 1,45,00 |
(a) 6 :2
(b) 5 :1
(c) 8 :3
(d) None of the above
Answer
Answer: (b) 5 :1
Explanation: Current Ratio = Current Assets/Current Liabilities
= 15,00,000/3,00,000= 5 : 1
Working note 1:
Working Capital = Current assets (-) Current liabilities
1200000 = Current assets (-) 300000
Current assets = 1500000
Working note 2:
Current liabilities = Total debt (-) Long term debt
Current liabilities = 445000 (-) 145000
Current liabilities = 300000
5.From the following information compute the current ratio.
| Particulars | Amount |
| Working Capital | 72,00,000 |
| Trade Payables | 14,00,000 |
| Other Current Liabilities | 4,00,000 |
(a) 10 :3
(b) 5 :1
(c) 20 :7
(d) None of the above
Answer
Answer: (b) 5 :1
Explanation: Current Ratio = Current Assets/ Current Liabilities
= 90,00,000/18,00,000= 5 : 1
Working note 1:
Working Capital = Current assets (-) current liabilities
7200000 = Current assets (-) 1800000
Current assets = 9000000
Working note 2:
current liabilities = Trade Payables (+) Other Current Liabilities
current liabilities = 1400000 (+) 400000
current liabilities = 1800000
Accounting Ratios Class 12 MCQ Questions with Answers
6.From the following information compute the current ratio.
| Particulars | Amount |
| Working Capital | 6,00,000 |
| Current Assets | 16,00,000 |
| Inventory | 4,50,000 |
(a) 14.4 :4
(b)4. 8 :2
(c) 1.6 :1
(d) None of the above
Answer
Answer: (c) 1.6 :1
Explanation: Current Ratio = Current Assets/ Current Liabilities
= 16,00,000/10,00,000= 1.6 : 1
Working note 1:
Working Capital = Current assets (-) Current liabilities
600000 = 1600000 (-) Current liabilities
Current liabilities = 1000000
7.A firm had current assets of RS. 525000, it then paid a current liability of RS. 125000. After this payment the current ratio was 5 : 4. Determine the current liabilities and working capital Before the payment.
(a) Current liabilities 400000 and Working capital 320000
(b) Current liabilities 445000 and Working capital 80000
(c) Current liabilities 40000 and Current liabilities 60000
(d) None of the above
Answer
Answer: (a) Current liabilities 400000 and Working capital 320000
Explanation: Working capital = Current assets (-) Current liabilities
= 400000 (-) 320000
= 80000
Workings:
Current Assets = 525000
Current Assets After the payment of RS. 125000 would be 525000 (-) 125000 = 400000
As current ratio is 5 : 4 and current assets are RS. 400000,
Current Ratio = Current Assets/Current Liabilities
5 : 4 = 4,00,000/(current liabilities)
Current liabilities = 3,20,000
8.A firm had current assets of RS. 875000, it then paid a current liability of RS. 105000. After this payment the current ratio was 11 : 9. Determine the current liabilities and working capital after the payment.
(a) Current liabilities 40000 and Current liabilities 60000
(b) Current liabilities 770000 and Working capital 630000
(c) Current liabilities 630000 and Working capital 140000
(d) None of the above
Answer
Answer: (c) Current liabilities 630000 and Working capital 140000
Explanation : Working capital = Current assets (-) Current liabilities
= 770000 (-) 630000
= 140000
Workings:
Current Assets = 875000
Current Assets After the payment of RS. 105000 would be 875000 (-) 105000 = 770000
As current ratio is 11 : 9 and current assets are RS. 770000,
Current Ratio = Current Assets/Current Liabilities
11 : 9 = 7,70,000/(current liabilities)
Current liabilities = 6,30,000
9.Calculate Inventory turnover ratio from the following information.
| Particulars | Amount |
| Gross Profit Ratio | 10% |
| Cash Sales | 2,00,000 |
| Credit Sales | 2,00,000 |
| Return Inwards | 50,000 |
| Opening inventory | 30,000 |
| Closing inventory | 33,000 |
(a) 10 Times
(b) 11 Times
(c) 5 Times
(d) None of the above
Answer
Answer: (a) 10 Times
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/ Average Inventory
= 3,15,000/31,500= 10 times
Working note 1:
Cost of goods sold = Net Sales (-) gross profit
= 350000 (-) 10% X 350000
= 350000 (-) 35000
= 315000
Working note 2:
Average inventory = (opening inventory + closing inventory)/2
= (30,000 + 33,000)/2= 31,500
10.Calculate Inventory turnover ratio and average age of inventory from the following information:
| Particulars | Amount |
| Gross Profit Ratio | 50% |
| Cash Sales | – |
| Credit Sales | 2,00,000 |
| Return Inwards | 1,04,000 |
| Opening inventory | 60,000 |
| Closing inventory | 60,000 |
(a) 8 Times and 455 Days
(b) 8 Times and 450 Days
(c) 6 Times and 440 Days
(d) None of the above
Answer
Answer: (b) 8 Times and 450 Days
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
= 48,000/60,000= 0.8 times
Average age of Inventory = Number of Days in a year/Inventory turnover ratio
= 360/0.8= 450 days
Working note 1:
Cost of goods sold = Net Sales (-) gross profit
= 96000 (-) 50% X 96000
= 96000 (-) 48000
= 48000
Working note 2:
Average inventory = (opening inventory + closing inventory)/2
= (60,000 + 60,000)/2= 60,000
Accounting Ratios Class 12 MCQ Questions with Answers
11.Calculate Inventory turnover ratio from the following information:
| Particulars | Amount |
| Cost of revenue from operations | 2,00,000 |
| Purchases | 2,50,000 |
| Direct expenses | 50,000 |
| Opening inventory | 1,50,000 |
(a) 1 Times
(b) 2 Times
(c) 3 Times
(d) None of the above
Answer
Answer: (a) 1 Times
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/ Average Inventory
= 2,00,000/2,00,000= 1 times
Working note 1:
Cost of goods sold = Opening inventory + Purchases + Direct expenses – Closing inventory
200000 = 150000 + 250000 + 50000 – Closing inventory
Closing inventory = 250000
Working note 2:
Average inventory = (opening inventory + closing inventory)/2
= (1,50,000 + 2,50,000)/2= 2,00,000
12.Calculate Inventory turnover ratio from the following information:
| Particulars | Amount |
| Gross Profit Ratio | 60% |
| Credit Sales | 4,00,000 |
| Cash Sales | 10,00,000 |
| Purchases | 8,40,000 |
| Opening inventory | 3,00,000 |
(a) 8.5 Times
(b) 7.5 Times
(c) 3.5 Times
(d) None of the above
Answer
Answer: (c) 3.5 Times
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
= 5,60,000/1,60,000= 3.5 times
Working note 1:
Cost of goods sold = Net Sales (-) gross profit
= 1400000 (-) 60% x 1400000
= 1400000 (-) 840000
= 560000
Net sales = Cash sales + Credit Sales
= 1000000 + 400000
= 1400000
Working note 2:
Average inventory = (opening inventory + closing inventory)/2
= (20,000 + 3,00,000)/2= 1,60,000
Cost of goods sold = Opening inventory + Purchases (-) Closing inventory
560000 = Opening inventory + 840000 (-) 300000
= Opening inventory + 540000
Opening inventory = 20000
13.Cost of revenue from operations is 22,00,000, Inventory turnover ratio is 2 Times and opening inventory is 112000 less than the closing inventory. Calculate the value of opening Inventory.
(a) 1042000
(b) 1049000
(c) 1044000
(d) 2088000
Answer
Answer: (c) 1044000
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
2 times = 22,00,000/(Average inventory)
Average inventory = 11,00,000
Average inventory = (opening inventory + closing inventory)/2
Let closing inventory be ‘a’, so opening inventory is a-1,12,000.
11,00,000 = ((a-1,12,000) + a)/2
22,00,000 = 2a – 1,12,000
2a = 23,12,000
a = 11,56,000
Therefore, opening inventory = 11,56,000 – 1,12,000
= 10,44,000
14Calculate Inventory turnover ratio from the following information:
| Particulars | Amount |
| Gross Profit | -20% |
| Revenue from operations | 5,00,000 |
| Purchases | 5,50,000 |
| Carriage inwards | 30,000 |
| Carriage outwards | 15,000 |
| Opening inventory | 70,000 |
(a) 12 Times
(b) 9 Times
(c) 10 Times
(d) None of the above
Answer
Answer: (c) 10 Times
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
= 6,00,000/60,000= 10 times
Working note 1:
Cost of goods sold = Revenue from operation (-) gross profit
= 500000 (-) -20% X 500000
= 500000 (-) -100000
= 600000
Working note 2:
Average inventory = (opening inventory + closing inventory)/2
= (70,000 + 50,000)/2= 60,000
Cost of goods sold = Opening inventory + Purchases + carriage inwards – closing inventory
6,00,000 = 70,000 + 5,50,000 + 30,000 – closing inventory
Closing inventory = 6,50,000 – 6,00,000
= 50,000
15.Calculate Inventory turnover ratio from the following information: Gross profit ratio is 60 % Of cost and revenue from operation is RS. 2100000 . Opening inventory was 2/3rd of closing inventory and closing inventory was 25 % of revenue from operation.
(a) 3 Times
(b) 6 Times
(c) 5 Times
(d) None of the above
Answer
Answer: (a) 3 Times
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
= 13,12,500/4,37,500= 3 times
Working note: = Gross profit ratio is 60% Of cost
Therefore goods costing Rs. = 100 is sold for RS. 160
Cost of goods sold = 100
If revenue from operation is = 2100000
Cost of Goods Sold = 13,12,500 ((21,00,000 * 100)/160)
Average inventory = (opening inventory + closing inventory)/2
= (3,50,000 + 5,25,000)/2= 4,37,500
Closing inventory = 25% x Revenue from operation
Closing inventory = 25% x 2100000
Closing inventory = 525000
Opening inventory = (2/3)x Closing inventory
Opening inventory = (2/3) x 525000
Opening inventory = 350000
Accounting Ratios Class 12 MCQ Questions with Answers
16.Cost of revenue from operations is 250000, Inventory turnover ratio is 2 times and opening inventory is 0.5 times More than the closing inventory. Calculate the value of opening Inventory.
(a) 62500
(b) 100000
(c) 150000
(d) None of the above
Answer
Answer: (c) 150000
Explanation: Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
2 times = 2,50,000/(Average inventory)
Average inventory = 1,25,000
Average inventory = opening inventory + closing inventory
2
Let closing inventory be ‘a’, so opening inventory is a + 0.5a.
1,25,000 = ((a + 0.5a) + a)/2
2,50,000 = 2.5a
a = 1,00,000
Therefore, opening inventory = 1,00,000 + 0.5 x 1,00,000
= 1,50,000
17.From the following information, calculate fixed assets turnover ratio:
| Particulars | Amount |
| Long term borrowings | 1,00,000 |
| Trade receivables | 50,000 |
| Plant | 12,00,000 |
| Building | 5,00,000 |
| Equipment | 3,00,000 |
Revenue from the operations for the year was RS. 9000000.
(a) 7.5 Times
(b) 4.5 Times
(c) 2.5 Times
(d) None of the above
Answer
Answer: (b) 4.5 Times
Explanation: Fixed Asset Turnover Ratio = Net Sales/Total Fixed Assets
= 90,00,000/20,00,000= 4.5 times
Working Note 1:
Total Fixed assets = Plant + Building + Equipment
Total Fixed assets = 1200000 + 500000 + 300000
Total Fixed assets = 2000000
18.From the following information calculate the working capital turnover ratio:
| Particulars | Amount |
| Inventory | 1,50,000 |
| Bank | 1,75,000 |
| Trade receivables | 1,00,000 |
| Trade payables | 1,20,000 |
| Short term borrowings | 1,60,000 |
| Land | 4,00,000 |
| Plant | 2,00,000 |
Revenue from the operation for the year was RS. 2175000.
(a) 15 Times
(b) 17 Times
(c) 45 Times
(d) None of the above
Answer
Answer: (a) 15 Times
Explanation: Working Capital Turnover Ratio = Net Sales/Working Capital
= 21,75,000/1,45,000= 15 times
Working note 1 :
Working capital = Current assets (-) Current liabilities
Working capital = 425000 (-) 280000
Working capital = 145000
Working note 2 :
Current assets = Inventories + Bank + Trade receivable
Current assets = 150000 + 175000 + 100000
Current assets = 425000
Working note 3 :
Current liabilities = Trade creditors + Short term borrowings
Current liabilities = 120000 + 160000
Current liabilities = 280000
19.From the following information calculate the Current assets turnover ratio:
| Particulars | Amount |
| Inventory | 1,22,000 |
| Bank | 2,28,000 |
| Trade receivables | 2,50,000 |
| Bills payables | 1,80,000 |
| Salary outstanding | 1,30,000 |
| Land | 6,00,000 |
| Goodwill | 2,00,000 |
Revenue from the operation for the year was RS. 48,00,000.
(a) 24 Times
(b) 10 Times
(c) 8 Times
(d) None of the above
Answer
Answer: (c) 8 Times
Explanation: Current Assets Turnover Ratio = Net Sales/Current Assets
= 48,00,000/6,00,000= 8 times
Working note 1 :
Current assets = Inventories + Bank + Trade receivable
Current assets = 122000 + 228000 + 250000
Current assets = 600000
20.From the following information calculate the total assets turnover ratio:
| Particulars | Amount |
| Inventory | 2,00,000 |
| Bank | 4,00,000 |
| Trade receivables | 1,00,000 |
| Trade payables | 75,000 |
| Salary outstanding | 1,75,000 |
| Sales Tax payable | 2,75,000 |
| Land | 2,50,000 |
| Plant | 4,50,000 |
Revenue from the operation for the year was RS. 7000000.
(a) 10 Times
(b) 5 Times
(c) 8 Times
(d) None of the above
Answer
Answer: (b) 5 Times
Explanation: Total Asset Turnover Ratio = Net Sales/Total Assets
= 70,00,000/14,00,000= 5 times
Working note 1 :
Total assets = Inventories + Bank + Trade receivable + Land + Plant
Total assets = 200000 + 400000 + 100000 + 250000 + 450000
Total assets = 1400000
Accounting Ratios Class 12 MCQ Questions with Answers
21.From the following information calculate the debt equity ratio:
| Particulars | Amount |
| Equity share capital | 4,00,000 |
| Preference share capital | 1,50,000 |
| Reserves and surplus | 75,000 |
| Securities premium | – |
| Profit and loss | -25000 |
| 12% Debentures | 6,00,000 |
| Long term borrowings | 2,00,000 |
| Loan from bank | 1,00,000 |
(a) 1.5 : 1
(b) 3.5 : 2
(c) 5 : 4
(d) None of the above
Answer
Answer: (a) 1.5 : 1
Explanation: Debt Equity Ratio = Long Term Debt/Shareholders Fund
= 9,00,000/6,00,000= 1.5 : 1
Working note 1 :
Long term Debt = 12 % Debentures + Long term borrowings + Loans from bank
Long term Debt = 600000 + 200000 + 100000
Long term Debt = 900000
Working note 2 :
Shareholders fund = Equity Share Capital + Preference share capital + Reserve and surplus + Securities premium + Profit and loss balance
Shareholders fund = 400000 + 150000 + 75000 + 0 + (-25000)
Shareholders fund = 600000
22.From the following information calculate debt equity ratio.:
| Particulars | Amount |
| Long term borrowings | 80,000 |
| Long term provisions | 50,000 |
| Current liabilities | 40,000 |
| Non- current assets | 1,00,000 |
| Current assets | 1,20,000 |
(a) 7.8 : 5
(b) 2.6 : 1
(c) 5.2 : 4
(d) None of the above
Answer
Answer: (b) 2.6 : 1
Explanation: Debt Equity Ratio = Long Term Debt/Shareholders Fund
= 1,30,000/50,000= 2.6 : 1
Working note 1 :
Long term Debt = Long term borrowings + Long term provisions
Long term Debt = 80000 + 50000
Long term Debt = 130000
Working note 2 :
Shareholders fund = Non current assets + Working capital (-) Non current liabilities
OR
Shareholders fund = Non current assets + Current assets (-) Current liabilities (-) Long term borrowings (-) Long term provisions
Shareholders fund = 100000 + 120000 (-) 40000 (-) 80000 (-) 50000
Shareholders fund = 50000
23.Total revenue from the operation is 12,00,000 and cash revenue is 60 % of total revenue from the operation. Balance of opening receivable on 01.04.2016 is RS. 60,000 and the Balance of Closing receivable on 31.03.2017 is 20,000. Calculate the Trade receivable Turnover Ratio and average collection period.
(a) 12 Times 30 Days
(b) 18 Times 26 Days
(c) 36 Times 32 Days
(d) None of the above
Answer
Answer: (a) 12 Times 30 Days
Explanation: Trade Receivables Ratio = Net Revenue from Operations/Average Trade Receivables
= 4,80,000/40,000= 12 times
Average Collection Period = Number Of Days/ Trade Receivables Turnover Ratio
= 360/12= 30 Days
24.Calculate the trade payable turnover ratio and average payment period From the following information. Credit purchases during the 2016-2017 is 22,00,000 . Balance of opening Creditors and Bills payable on 01.04.2016 is RS. 60,000 and 30,000 and the Balance of Closing Creditors and bills payable on 31.03.2017 is RS. 1,90,000 and 1,20,000.
(a) 13 Times 37.72 Days
(b) 11 Times 32.72 Days
(c) 22 Times 27.72 Days
(d) None of the above
Answer
Answer: (b) 11 Times 32.72 Days
Explanation: Trade Payables Turnover Ratio = Net Purchases/Average Trade Payables
= 22,00,000/2,00,000= 11 times
Average Payment Period = Number Of Days/Trade Payables Turnover Ratio
= 360/11= 32.72 Days
Average trade payables = (opening bills payable + closing bills payable)/2
= 4,00,000/2= 2,00,000
25.Current Ratio is 5 : 4. Current Assets = 4,50,000. Calculate Net Working Capital.
(a) 90,000
(b) 4,50,000
(c) 4,00,000
(d) None of the above
Answer
Answer: (a) 90,000
Explanation: Net Working Capital = Current Assets (-) Current Liabilities
Net Working Capital = 450000 (-) 360000
Net Working Capital = 90000
Working note 1 :
Current Ratio = Current Assets/Current Liabilities
5 : 4 = 4,50,000/(current liabilities)
Current liabilities = 3,60,000
Accounting Ratios Class 12 MCQ Questions with Answers
26. Current Ratio of a business is 3 : 2 and Quick Ratio is 1.1. If Working Capital is Rs. 300000 then calculate the value of current assets and inventory.
(a) 6,00,000 and 2,40,000
(b) 3,00,000 and 2,40,000
(c) 9,00,000 and 2,40,000
(d) None of the above
Answer
Answer: (c) 9,00,000 and 2,40,000
Explanation: Working Capital = Current Assets (-) Current Liabilities
or
Current Liabilities = Current Assets (-) Working Capital
= 900000 (-) 300000
= 600000
Liquid Assets = Current Liabilities x Quick Ratio
= 600000 x 1.1
= 660000
Inventory = Current Assets (-) Liquid Assets
= 900000 (-) 660000
= 240000
Working Note 1 :
Working Capital = Current Assets (-) Current Liabilities
Working Capital = 3 (-) 2
Working Capital = 1
When working capital = 1 then Current Assets = 3
When working capital = 300000 then Current Assets = 900000
27.Current Assets of B Ltd. are Rs. 1,80,000 and the current ratio is 2 . Value of inventories is Rs. 45,000 . Calculate liquid ratio.
(a) 1.5 :1
(b) 2.5 :1
(c) 3 :1
(d) None of the above
Answer
Answer: (a) 1.5 :1
Explanation: Current Ratio = Current Assets/ Current Liabilities
2 = 1,80,000/(current liabilities)
Current liabilities = 90,000
Quick Ratio = Liquid Assets/Current Liabilities
= 1,35,000/90,000= 1.5
Working Notes:
Liquid Assets = Current Assets (-) Inventory
Liquid Assets = 180000 (-) 45000
Liquid Assets = 135000
28.Value of Inventory of J & Co. is Rs. 3,00,000 . Liquid Assets are Rs. 7,50,000. Quick Ratio is 1.25 . Calculate the current ratio .
(a) 0.5 :1
(b) 1.75 :1
c) 1.25 :1
(d) None of the above
Answer
Answer: (b) 1.75 :1
Explanation: Quick Ratio = Liquid Assets/Current Liabilities
1.25 = 7,50,000/(current liabilities)
Current liabilities = 6,00,000
Current Ratio = Current Assets/Current Liabilities
= 10,50,000/6,00,000= 1.75 : 1
Working Notes:
Current Assets = Liquid Assets + Inventory
= 750000 + 300000
= 1050000
29.Current Assets = Rs. 2,00,000 . Inventory = Rs. 50,000 . Prepaid Expenses = Rs. 30,000 . Working Capital = Rs. 1,40,000. Calculate Liquid Ratio.
(a) 4 :3
(b) 2 :1
(c) 5 :2
(d) None of the above
Answer
Answer: (b) 2 :1
Explanation: Liquid Assets = Current Assets (-) Inventory (-) Prepaid Expenses
Liquid Assets = 200000 (-) 50000 (-) 30000
Liquid Assets = 120000
Current Liabilities = 60000
Liquid Ratio = Liquid Assets/Current Liabilities
= 1,20,000/60,000= 2 : 1
Working Note 1 :
Current Liabilities = Current Assets (-) Working Capital
= 200000 (-) 140000
= 60000
30.The ratio of Current Assets (Rs. 75000 ) to Current Liabilities is 5 : 3. The firm is interested in maintaining a Current ratio of 4 : 3 by acquiring some Current Assets on credit. You are required to suggest the amount of Current Assets which must be acquired for this purpose.
(a) 45,000
(b) 20,000
(c) 45,000
(d) None of the above
Answer
Answer: (a) 45,000
Explanation: Current Ratio = Current Assets/Current Liabilities
5:3 = 75,000/(current liabilities)
Current liabilities = 45,000
Working note 1 :
Let x be the amount of current assets acquired on credit.
Current Ratio to be maintained= 4 : 3
4 : 3 = (75,000 + x)/(45,000 + x)
180000 + 4x = 225000 + 3x
4x-3x = 45000
1x = 45000
x = 45000
Accounting Ratios Class 12 MCQ Questions with Answers
31.From the Following information calculate Equity Ratio:
(a) 1.3
(b) 2.6
(c) 4.6
(d) None of the above
Answer
Answer: (a) 1.3
Explanation: Equity Ratio = Shareholders’ Equity/Capital Employed
= 2,60,000/2,00,000= 1.3
Working note 1 :
Shareholders’ Equity = Share Capital + Reserves + Surplus
Shareholders’ Equity = 220000 + 50000 + -10000
Shareholders’ Equity = 260000
Capital employed = Non Current Assets + Current Assets (-) Trade Payables
Capital employed = 180000 + 110000 (-) 90000
Capital employed = 200000
32.Compute Debt to Total Assets Ratio from the following information.
(a) 1.5 :1
(b) 6.5 :2
(c) 4.5 :1
(d) None of the above
Answer
Answer: (a) 1.5 :1
Explanation: Debt to Total Assets Ratio = Total Outside Liabilities/Total Assets
= 18,00,000/12,00,000= 1.5 : 1
Working note 1 :
Total Assets = Fixed Assets + Non Current Investments + Current Assets
Total Assets = 900000 + 200000 + 100000
Total Assets = 1200000
33.Compute Capital Gearing Ratio from the following information.
(a) 4.2 :1
(b) 3.4 :1
(c) 1.4 :1
(d) None of the above
Answer
Answer: (c) 1.4 :1
Explanation: Capital Gearing Ratio = Preference Share Capital + Dentures + Other/(Equity Share Capital + Reserves & Surplus)
= (2,00,000 + 1,00,000 + 60,000)/(2,00,000 + 1,00,000 – 40,000)
= 3,64,000/2,60,000= 1.4 : 1
34.Compute Proprietary ratio if equity share capital is Rs. 1,50,000; Preference Share Capital is Rs. 1,00,000; Capital Reserve is Rs. 60,000; Profit & Loss Balance is Rs. 40,000. The value of 6 % Debentures is Rs. 75,000 and 9 % Mortgage loan- Rs. 1,25,000. Value of Current Liabilities is Rs. 2,75,000 Non Current Assets is worth Rs. 55,000 Value of Current Assets is Rs. 45,000.
(a) 5.5
(b) 3.5
(c) 1.5
(d) None of the above
Answer
Answer: (b) 3.5
Explanation: Proprietary Ratio = Shareholders’ Funds/Total Assets
= 3,50,000/1,00,000= 3.5
Working note 1 :
Shareholders’ Funds = Equity share capital + Preference share capital + Capital reserve + Profit and loss balance
Shareholders’ Funds = 150000 + 100000 + 60000 + 40000
Shareholders’ Funds = 350000
Working note 2 :
Total Assets = Non current assets + Current assets
Total Assets = 55000 + 45000
Total Assets = 100000
35.Compute Interest Coverage ratio if equity share capital is Rs. 8,25,000; Preference Share Capital is Rs. 4,95,000; Capital Reserve is Rs. 2,47,500; Profit & Loss Balance is Rs. 4,12,500 . The Value of 15 % debentures is Rs. 1,50,000 and 10 % Mortgage loan of Rs. 3,00,000 .The value of Current Liabilities is Rs. 8,05,000. Non Current Assets is worth Rs. 16,50,000 and Value of Current Assets is Rs. 20,62,500.
(a) 7.6 times
(b) 5.6 times
(c) 4.6 times
(d) None of the above
Answer
Answer: (b) 5.6 times
Explanation: Interest Coverage Ratio = Net Profit before Interest and Tax/Fixed Interest charges
= 2,94,000/52,500= 5.6 times
Working Notes:
Interest on debenture = 15% x 150000
= 22500
Interest on loan = 10% x 300000
30000
Total interest charges = 52500
Accounting Ratios Class 12 MCQ Questions with Answers
36.Calculate profit before interest and tax from the following information. Profit after interest and tax 1,38,000. 18 % Debentures = 3,12,000. Tax @ 40 %.
(a) 2,30,000
(b) 2,86,160
(c) 5,16,160
(d) None of the above
Answer
Answer: (b) 2,86,160
Explanation: Profit before interest and tax = Profit before tax + Interest
Profit before interest and tax = 230000 + 56160
Profit before interest and tax = 286160
Profit before Tax = Profit after Tax (100/(1- tax rate))
= 1,38,000 (100/60) = 2,30,000
Interest = Rate of interest (x) Debentures
Interest = 18% (x) 312000
Interest = 56160
37.Calculate- Interest Coverage Ratio & Debt Service Coverage Ratio from the following information. Net Profit before interest and tax is Rs. 9,00,000. 15 % Long Term Debt 6,00,000 (Principal amount is repayable in 4 equal instalments).
(a) 10 & 3.75 times
(b) 11 & 5.75 times
(c) 12 & 4.75 times
(d) None of the above
Answer
Answer: (a) 10 & 3.75 times
Explanation: Interest Coverage Ratio = Net Profit before Interest and Tax/ Fixed Interest charges
= 9,00,000/90,000= 10 times
Debt Service Coverage Ratio = Earning Available for Debt Services/(Interest + Installments)
= 9,00,000/(90,000 + 1,50,000)= 3.75 times
Working Notes:
1. Interest on Long Term Debt = 15 % x 600000
90000
38.Earnings before Interest & Taxes is Rs. 2,00,000 and Lease Payments is Rs. 1,50,000. Interest is Rs. 1,00,000. Compute Fixed Charges Coverage Ratio.
(a) 1.4 :1
(b) 2.8 :1
(c) 4.2 :2
(d) None of the above
Answer
Answer: (a) 1.4 :1
Explanation: Fixed Charges Coverage Ratio = EBIT + Fixed Charges Before Tax/( Interest + Fixed Charges Before Tax )
= (2,00,000 + 1,50,000)/(1,00,000 + 1,50,000)= 1.4 : 1
39.If Revenue from Operations of XYZ Ltd is Rs. 25,00,000; Cost of Revenue from Operations is Rs. 10,00,000; Selling Expense is Rs. 250000; Administrative Expenses is Rs. 2,00,000. Calculate- Gross Profit Ratio, Operating Ratio, Operating Profit Ratio.
(a) 60% ; 58% ; 42%
(b) 58% ; 42% ; 60%
(c) 60% ; 42% ; 58%
(d) None of the above
Answer
Answer: (a) 60% ; 58% ; 42%
Explanation: Gross Profit Ratio = Gross Profit x 100/ Revenue from Operations
= (15,00,000/25,00,000)x100 = 60%
Operating Profit Ratio = Operating Cost x 100/Net Revenue from Operations
= (14,50,000/25,00,000)x100 = 58%
Operating Profit Ratio = 100 (-) Operating Ratio
Operating Profit Ratio = 100 (-) 58
Operating Profit Ratio = 42 %
Working Notes:
1. Gross Profit = Revenue from Operations (-) Cost of Revenue from Operations
Gross Profit = 2500000 (-) 1000000
Gross Profit = 1500000
2. Operating Cost = Cost of Revenue from Operations + Selling Expenses + Administrative Expenses
3. Operating Cost = 1000000 + 250000 + 200000
4. Operating Cost = 1450000
40.Calculate Return on Assets & Return on Capital Employed on the basis of the following information.
(a) 48.59 % and 49.95 %
(b) 45.59 % and 46.95 %
(c) 49.59 % and 51.95 %
(d) None of the above
Answer
Answer: (b) 45.59 % and 46.95 %
Explanation: Return on Assets = EBIT x (1- tax) x 100/Total Assets
= (9,00,000/15,50,000)x 0.785 x 100 = 45.59%
Return on Capital Employed = EBIT x (1- tax) x 100/Capital Employed
= (9,00,000/15,05,000)x 0.785 x 100 = 46.95%
Working Notes:
EBT = EBIT (-) Interest
EBT = 900000 (-) 225000
EBT = 675000
Tax Rate= (Tax Rate x 100)/EBT
= (1,45,000/6,75,000)x 100
Tax Rate = 21.4814814814815 %
Tax Rate = 21.4814814814815%
2. Total Assets = 1550000
3. Capital Employed = 1505000
Accounting Ratios Class 12 MCQ Questions with Answers
41.From the following information calculate return on total assets.
(a) 20%
(b) 35%
(c) 25%
(d) None of the above
Answer
Answer: (c) 25%
Explanation: Return on Assets = Net Profit after tax x 100/Average Total Assets
= (1,18,750/4,75,000)x100 = 25%
Working note 1 :
Value of total assets at the end = Fixed Assets + Current Assets
= 325000 + 175000
= 500000
Average Total Assets = (opening assets + closing assets)/2
= (4,50,000 + 5,00,000)/2= 4,75,000
42.Calculate return on capital employed from the following information.
Calculate return on equity from the following information.
(a) 13%
(b) 28%
(c) 18%
(d) None of the above
Answer
Answer: (c) 18%
Explanation: Return on Capital Employed = Net Profit before Interest and Tax x 100/Capital Employed
= 62,100/3,45,000x 100 = 18%
Working note 1 :
Capital employed = Fixed Assets + Current Assets (-) Current Liabilities
Capital employed = 275000 + 155000 (-) 85000
Capital employed = 345000
43. On the basis of the following data calculate earning per share:
(a) 1.24
(b) 3.24
(c) 5.24
(d) None of the above
Answer
Answer: (a) 1.24
Explanation: EBIT = 1200000
Less: Interest on Debentures = 500000
EBT = 700000
Less: Tax = 245000
EAT = 455000
Less: Preference Dividend = 300000
Earnings for Equity Shareholders = 155000
Less: Retained Earnings = 93000
Dividend Paid = 62000
EPS= Earning Available for Equity Shareholders/No. of Equity Shares
= 1,55,000/1,25,000= 1.24 per share
44.On the basis of the following data calculate market price per share:
(a) 7.44
(b) 3.72
(c) 8.6
(d) None of the above
Answer
Answer: (a) 7.44
Explanation: EBIT = 1200000
Less: Interest on Debentures = 500000
EBT = 700000
Less: Tax = 245000
EAT = 455000
Less: Preference Dividend = 300000
Earnings for Equity Shareholders = 155000
Less: Retained Earnings = 93000
Dividend Paid = 62000
EPS= Earning Available for Equity Shareholders/No. of Equity Shares
= 1,55,000/2,50,000= 0.62 per share
Market price per share = PE Ratio x EPS
Market price per share = 12 x 0.62
Market price per share = 7.44
45. On the basis of the following data calculate dividend per share:
(a) 0.62
(b) 2.62
(c) 4.62
(d) None of the above
Answer
Answer: (a) 0.62
Explanation: EBIT = 750000
Less: Interest on Debentures = 100000
EBT = 650000
Less: Tax = 195000
EAT = 455000
Less: Preference Dividend = 300000
Earnings for Equity Shareholders = 155000
Less: Retained Earnings = 124000
Dividend Paid = 31000
EPS= Earning Available for Equity Shareholders/No. of Equity Shares
= 1,55,000/50,000= 3.1 per share
DPS= Dividend Paid/No. of Equity Shares
= 31,000/50,000= 0.62 per share
46. On the basis of the following data calculate Dividend Payout Ratio
(a) 50%
(b) 52%
(c) 54%
(d) None of the above
Answer
Answer: (a) 50%
Explanation: EBIT = 600000
Less: Interest on Debentures = 100000
EBT = 500000
Less: Tax = 125000
EAT = 375000
Less: Preference Dividend = 120000
Earnings for Equity Shareholders = 255000
Less: Retained Earnings = 127500
Dividend Paid = 127500
EPS= Earning Available for Equity Shareholders/No. of Equity Shares
= 2,55,000/60,000= 4.25 per share
Dividend per share = 1,27,500/60,000= 2.125
Dividend Payout Ratio = Dividend per Share/Earning per Share
= 2.125/4.25= 50%