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Accounting Ratios Class 12 MCQs Questions with Answers
Multiple Choice Questions (MCQs):
The two basic measures of operational efficiency of a company are
(a) Inventory Turnover Ratio and Working Capital Turnover Ratio
(b) Liquid Ratio and Operating Ratio
(c) Liquid Ratio and Current Ratio
(d) Gross Profit Margin and Net Profit Margin
Answer: (a) Inventory Turnover Ratio and Working Capital Turnover Ratio
Acid Test ratio comes under:
(a) Liquidity ratio
(b) Solvency ratio
(c) Profitability ratio
(d) Activity ratio
Answer: (a) Liquidity ratio
Current assets are those assets which are convertible into cash within:
(a) One month
(b) 6 months
(c) 12 months
(d) none of these
Answer: (c) 12 months
Which of the following is not considered in the ratio analysis as per guidance notes?
(a) Fixed Assets
(b) Share capital
(c) Other Non-current Assets
(d) Non-current Assets
Answer: (c) Other Non-current Assets
Which of the following will increase the current ratio where it is 2 : 1 ?
(a) Payment to creditors
(b) Conversions of receivables into cash
(c) Purchase of goods on credit
(d) Purchase of goods for cash
Answer: (a) Payment to creditors
Long term solvency ratio is judged by which of the following ratio?
(a) Debt equity ratio
(b) Total assets turnover ratio
(c) Liquidity ratios
(d) Operating ratio
Answer: (c) Liquidity ratios
Which of the following ratios provide solvency position of a business in the long run?
(a) Liquidity Ratios
(b) Solvency ratios
(c) Profitability ratios
(d) Turnover ratios
Answer: (b) Solvency ratios
In debt equity ratio, debt refers to
(a) Short term debts
(b) Total debts
(d) Long term borrowings and long term debts
Answer: (d) Long term borrowings and long term debts
Which of the following transactions will increase debt equity ratio which is 1 : 2?
(a) Issue of shares for cash
(b) Redemption of preference shares
(c) Redemption of debentures
(d) Conversion of debentures into shares
Answer: (b) Redemption of preference shares
Interest coverage is equal to
(a) Interest after interest but before tax / interest on debt
(b) Interest before interest and tax / interest on debt
(c) Interest after interest and debt / interest on debt
(d) Interest on debt / Interest before interest and tax
Answer: (b) Interest before interest and tax / interest on debt
Cost of revenue from operations is the difference between
(a) Revenue from operations + Gross Profit
(b) Revenue from operations – Gross Profit
(c) Revenue from operations – Net profit
(d) Revenue from operations + Net Profit
Answer: (b) Revenue from operations – Gross Profit
State whether the following statements are true or false:
Issue of bonus shares will decrease the debt equity ratio.
Buying of goods for cash will decrease current ratio.
For calculating return on capital employed, net profit before interest is taken.
Purchase of goods on credit will not change the current ratio.
Working capital and net working capital are assumed to be one and same thing.
Purchase of stock on credit will not affect quick ratio.
The excess of revenue from operation over cost of revenue from operation is known as net profit.
Conversion of debentures into equity results in decrease in debt equity ratio in case debt equity ratio is 1 : 2.
Purchase of stock will decrease the inventory turnover ratio.
Operating cost + operating profit = revenue from operations.
Fill in the blanks with correct word:
The ______ ratios are primarily measure of return.
The ________ of a company is measured by its ability to pay short-term liabilities.
_______ ratios are those ratios through which speed of various accounts converted into cash is measured.
______ are interested in the average collection period.
While calculating current ratio, ________ are excluded from the list of current assets.
Answer: loose tools and spares
While calculating working capital ratio, ________ is included in the current assets.
Answer: loose tools and spares
Under net profit ratio, normally net profit is ______ taken.
Answer: net profit after tax
Operating ratio + operating ratio = ________.
While calculating current ratio, trade receivables should be taken _______ (after / before) deducting provision for doubtful debts.
While calculating working capital turnover ratio, trade receivables should be taken _______ (after / before) deducting provision for doubtful debts.
One word Questions:
What will be the effect on current ratio if a bills payable is discharged on maturity? (CBSE SP 2019-20)
Answer: The current ratio will increase
Debt Equity Ratio of a company is 1:2. Purchase of a Fixed asset for ₹ 5,00,000 on long term deferred payment basis will increase, decrease or not change the ratio?
It is a simple arithmetical expression of relationship between two figures. Name the term.
The liquidity of a business firm is measured by its ability to satisfy its long-term obligations as they become due. Name a ratio used for this purpose.
Answer: Current Ratio.
X Ltd. has a Debt-Equity Ratio at 3 : 1. According to the management it should be maintained at 1 : 1. What is the choice to do so?
Answer: To increase the equity or reduce the debt.
How the solvency of a business is assessed by Financial Statement Analysis? (CBSE Delhi 2012).
Answer: With the help of solvency ratios
Assuming that the debt to equity ratio is 1 : 2, state giving reason, whether the ratio will improve, decline or will have no change in case equity shares are issued for cash. (CBSE Foreign 2006)
Debt to equity ratio of a company is 08 : 1. State whether long term loan obtained by the company will increase, decrease or not change the ratio. (CBSE Outside Delhi 2008)
Inventory Turnover ratio of a company is 3 times. State, giving reason, whether the ratio improve, decline or do not change because of increase in the value of closing stock by ₹ 5,000. (CBSE Outside Delhi 2008)
Trade Receivables Turnover Ratio of a company is 6 times. State with reason whether the ratio will improve, decrease or not change due to increase in the value of closing inventory by ₹ 50,000. (CBSE Foreign 2008)
Answer: No change.
If a company has earned ₹ 10,00,000 as profit before interest and tax, ROI is 20%. State the capital employed in the company.
Answer: ₹ 5,00,000
What will be operating profit if operating ratio is 88.94? (CBSE Delhi 2009)
Answer: Operating Profit = 100 – 88.94 = 11.06
State with reason whether repayment of long-term loan will result in increase, decrease or no change of debt-equity ratio. (CBSE Outside Delhi 2010 Compt.)
A company has Share Capital of ₹ 5,00,000, Reserves and Surplus of ₹ 2,00,000 and Debt Equity Ratio of 1.8 : 1. It has issued additional Share Capital of ₹ 2,00,000 for cash and bonus shares of ₹ 1,00,000. What will be new Debt Equity Ratio?
Answer: 1,4 : 1
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Accountancy MCQ Class 12 Part 1 and Accounts MCQ Class 12 Part 2
- Accounting for Not for Profit Organisation Class 12 MCQ
- Accounting for Partnership: Basic Concepts Class 12 MCQ
- Reconstitution of Partnership Firm: Admission of a Partner Class 12 MCQ
- Reconstitution of Partnership Firm: Retirement / Death of a Partner Class 12 MCQ
- Dissolution of a Partnership Firm Class 12 MCQ
- Accounting for Share Capital Class 12 MCQ
- Issue and Redemption of Debentures Class 12 MCQ
- Financial Statements of a Company Class 12 MCQ
- Analysis of Financial Statements Class 12 MCQ
- Accounting Ratios Class 12 MCQ
- Cash Flow Statement Class 12 MCQ