[250] MCQs of Accounting Ratios (Accountancy class 12)

Ratios calculated to measure the firm’s ability to meet its short-term obligations are

(a) Profitability Ratios
(b) Activity Ratios
(c) Liquidity Ratios
(d) Solvency Ratios

Ans – (c)

Current Ratio and Quick Ratio of a company are 2 : 1.

From the following transaction, select the transaction which will not change the current Ratios as well as Quick Ratio:

(a) Purchase of stock-in-trade for cash
(b) sale of an office furniture (Book value ₹ 25,000) for ₹ 20,000
(c) Cash collected from trade receivables ₹ 20,000
(d) Payment of dividend

Ans – (c)

Assuming that the current ratio is 2 : 1, purchase of goods on credit would:

(a) Increase Current Ratio
(b) Decrease Current Ratio
(c) Have no effect on Current Ratio
(d) Decrease gross profit ratio

Ans – (b)

Current Ratio will be:

(a) 2.6 : 1
(b) 2.24 : 1
(c) 2.2 : 1
(d) 2.4 : 1

Ans – (c)

Current Ratio of a Company is 2.4 : 1 and its Current Liabilities are ₹ 2,00,000. Subsequently, it sold goods costing ₹ 1,00,000 at a profit of 40%, half of which was on Credit. Current Ratio will be:

(a) 3.1 : 1
(b) 2.4 : 1
(c) 2.6 : 1
(d) 2.5 : 1

Ans – (c)

Assuming that the current ratio is 2 : 1, Cash paid against Bills Payable would:

(a) Increase current ratio
(b) Decrease Current Ratio
(c) Have no effect on Current Ratio
(d) Decrease gross profit ratio

Ans – (a)

Quick ratio of Megamart Ltd. is 1.5 : 1. Which of the following transactions will result in decrease in this ratio?

(a) Sale of goods costing ₹ 10,000 for ₹ 12,000
(b) Cash collected from trade receivables ₹ 41,000
(c) Purchase of goods for cash ₹ 38,000
(d) Creditors were paid ₹ 11,000

Ans – (c)

Liquid Assets:

(a) Current Assets – Prepaid Exp.
(b) Current Assets – Inventory + Prepaid Exp.
(c) Current Assets – Inventory – Prepaid Exp.
(d) Current Assets + Inventory – Prepaid Exp.

Ans – (c)

Current Ratio will be:

(a) 2.04 : 1
(b) 2 : 1
(c) 1.7 : 1
(d) 1.67 : 1

Ans – (a)

Following particulars are related to X Ltd.

Current Ratio will be:

(a) 2.2 : 1
(b) 3 : 1
(c) 2 : 1
(d) 3.3 : 1

Ans – (c)

Current Ratio is:

(a) Solvency Ratio
(b) Liquidity Ratio
(c) Activity Ratio
(d) Profitability Ratio

Ans – (b)

Inventory ₹ 3,00,000 (excluding loose tools ₹ 90,000); Trade Receivables ₹ 1,10,000; Trade Payables ₹ 1,80,000; Prepaid Expenses ₹ 40,000 and Goodwill is ₹ 45,000. Current Ratio will be:

(a) 2.75 : 1
(b) 2.5 : 1
(c) 3 : 1
(d) 3.25 : 1

Ans – (b)

Which of the following is/are objectives of ratio analysis?

a) To know the areas of the business which need more attention.
b) To provide a deeper analysis of the profitability, liquidity, solvency
and efficiency levels in the business.
c) To provide information by making cross-sectional analysis by comparing the performance with the best industry standards
d) All of the above

A Company’s Quick Ratio is 1.5 : 1; Current Liabilities are ₹ 2,00,000 and Inventory is ₹ 1,80,000. Current Ratio will be:

(a) 0.9 : 1
(b) 1.9 : 1
(c) 1.4 : 1
(d) 2.4 : 1

Ans – (d)

Debit-Equity Ratio will be

(a) 2 : 1
(b) 1.2 : 1
(c) 0.9 : 1
(d) 1.5 : 1

Ans – (d)

Current Ratio will be:

(a) 3 : 1
(b) 2.48 : 1
(c) 2.52 : 1
(d) 2.4 : 1

Ans – (d)

A transaction involving decrease in Debt-Equity Ratio and increase in Current Ratio is

(a) Issue of Debentures against the purchase of Fixed Assets
(b) Redemption of Preference Shares for Cash
(c) Issue of Equity Shares for Cash
(d) Issue of Debentures for Cash

Ans – (c)

A Company’s Quick Ratio is 1.8 : 1; Liquid Assets are ₹ 5,40,000 and Inventory is ₹ 1,50,000. Its Current Ratio will be:

(a) 2 : 1
(b) 2.3 : 1
(c) 1.8 : 1
(d) 1.3 : 1

Ans – (b)

Current Assets ₹ 1,92,500; Inventory ₹ 55,000; Prepaid Expenses ₹ 6,250 and Current Ratio is 2.2 : 1; then Liquid Ratio will be

(a) 3 : 1
(b) 1.5 : 1
(c) 1 : 1
(d) None of these

Ans – (b)

Liquid Assets of a Company are ₹ 15,00,000 and Current Liabilities are ₹ 20,00,000. Which of the following will increase the Liquid Ratio:

(a) Purchase of goods o credit for 2 months
(b) Sale of goods costing ₹ 1,00,000 at a loss of ₹ 40,000
(c) Cash paid to a trade Creditor
(d) Payment of Outstanding Salaries

Ans – (b)

Liquid Ratio will be:

(a) 2 : 1
(b) 2.2 : 1
(c) 1.8 : 1
(d) 1.9 : 1

Ans – (c)

A Company’s Current Ratio is 2.8 : 1; Current Liabilities are ₹ 2,00,000; Inventory is ₹ 1,50,000, and Prepaid Expenses are ₹ 10,000. Its Liquid Ratio will be:

(a) 3.6 : 1
(b) 2.1 : 1
(c) 2 : 1
(D) 2.05 : 1

ANS – (C)

A firm’s working capital is ₹ 2,70,000. Its current ratio is 3.5 : 2. Its Current Assets will be

(a) ₹ 6,30,000
(b) ₹ 3,37,500
(c) ₹ 8,50,000
(d) ₹ 3,50,000

Ans – (a)

The Quick Ratio of a company is 1 : 2. Which of the following transactions will result in an increase in this ratio?

(a) Cash received from debtors
(b) Sold goods on credit
(c) Purchase goods on credit
(d) Purchased goods on cash

Ans – (b)

On the basis of following data, the liquid ratio of a company will be: Current Ratio 5 : 3; Current Liabilities ₹ 75,000 and Inventory ₹ 25,000.

(a) 1 : 1
(b) 2 : 1.8
(c) 3 : 2
(d) 4 : 3

Ans – (d)

The Current Ratio is classified under the group of

a) Solvency Ratios
b) Liquidity Ratios
c) Activity Ratios
d) Profitability Ratios

A firm’s current ratio is 3.5 2. Its current liabilities are ₹ 80,000. Its working capital will be:

(a) ₹ 1,20,000
(b) ₹ 1,60,000
(c) ₹ 60,000
(d) ₹ 2,80,000

Ans – (c)

A Company’s Current Ratio is 3 : 1 and Liquid Ratio is 1.2 : 1. If its Current Liabilities are ₹ 2,00,000, What will be the value of Inventory?

(a) ₹ 2,40,000
(b) ₹ 3,60,000
(c) ₹ 4,00,000
(d) ₹ 40,000

Ans – (b)

When current ratio is 4 : 1, Current Assets are ₹ 60,000 and Quick Ratio is 2.5 : 1, the amount of ‘Inventory’ will be:

(a) ₹ 22,500
(b) ₹ 37,500
(c) ₹ 15,000
(d) ₹ 25,000

Ans – (a)

Current Ratio of a Company is 2.5 : 1. If its working capital is ₹ 60,000. Its current liabilities will be:

(a) ₹ 40,000
(b) ₹ 60,000
(c) ₹ 1,00,000
(d) ₹ 24,000

Ans – (a)

A Company’s Current Assets are ₹ 6,00,000 and Working Capital is ₹ 2,00,000. Its Current Ratio will be:

(a) 3 : 1
(b) 1.5 : 1
(c) 2 : 1
(d) 4 : 1

Ans – (b)

Liquid Assets do not include:

(a) Trade Receivables
(b) Cash and Cash Equivalents
(c) Inventory
(d) Short term Investments

Ans – (c)

Which of the following points out the significance of ratio analysis?

a) It helps the business in identifying the problem areas.
b) It ignores price level changes.
c) It ignores qualitative aspects
d) All of the above

Ans – a)

A Company’s Current Ratio is 2.4 : 1 and Working Capital is ₹ 5,60,000. If its Liquid Ratio is 1.5, What will be the value of Inventory?

(a) ₹ 6,00,000
(b) ₹ 2,00,000
(c) ₹ 3,60,000
(d) ₹ 6,40,000

Ans – (c)

A Company’s Current Ratio is 2.5 : 1 and its Working Capital is ₹ 60,000. If its inventory is ₹ 52,000, What will be the Liquid Ratio?

(a) 2.3 : 1
(b) 2.8 : 1
(c) 1.3 : 1
(d) 1.2 : 1

Ans – (d)

The current ratio of a company is 1.8 : 1 and its Quick Ratio is 1.6 : 1. From the following transactions, pick out the transactions which involves an increase in both the current Ratio and Quick Ratio:

(a) Goods worth ₹ 10,000 sold at a loss of ₹ 2,000.
(b) Insurance premium of ₹ 3,000 paid in advance
(c) Plant and Machinery purchased for ₹ 9,000
(d) Bills Payable of ₹ 2,000 honoured on the due date

Ans – (d)

Current Ratio of Super Ltd. is 2 : 1. Which of the following transactions will result in decrease in this ratio?

(a) Payment of ₹ 40,000 to creditors
(b) Sale of furniture (book value ₹ 38,000) for ₹ 16,000 only
(c) Repayment of long term loan of ₹ 7,00,000
(d) Cash collected from debtors ₹ 1,18,000

Ans – (c)

Debentures ₹ 80,000, Trade Payables ₹ 1,20,000. Trade Receivables ₹ 90,000, Prepaid Expenses ₹ 10,000, Inventory ₹ 2,00,000 and Goodwill is ₹ 60,000. Current Ratio will be:

(a) 1.5 : 1
(b) 2.5 : 1
(c) 3 : 1
(d) 1.8 : 1

Ans – (b)

Current Ratio of Adaar Ltd. is 2.5 : 1. Accountant wants to maintain it at 2 : 1. Following options are available:

(i) he can repaid Bills Payable
(ii) He can Purchase Goods on Credit
(iii) He can take Short term Loan

Choose the correct option.

(a) Only (i) is correct
(b) Only (ii) is correct
(c) Only (i) and (iii) are correct
(d) Only (ii) and (iii) are correct

Ans – (d)

Total Assets will be:

(a) ₹ 3,20,000
(b) ₹ 75,00,000
(c) ₹ 3,00,000
(d) ₹ 80,00,000

Ans – (d)

Total Assets will be:

(a) ₹ 19,20,000
(b) ₹ 30,00,000
(c) ₹ 35,00,000
(d) ₹ 32,50,000

Ans – (b)

Current Ratio of Cadila Ltd. is 2.4 : 1. Accountant wants to maintain it at 2 : 1. Following options are available:

(i) He can repay the creditors
(ii) He can purchase goods on credit
(iii) He can take short term loan from the bank

Choose the Correct Option.

(a) Only (i) is correct
(b) Only (ii) is correct
(c) Only (i) and (iii) are correct
(d) Only (ii) and (iii) are correct

Ans – (d)

Calculate Fixed Assets from the following:

Share Capital ₹ 7,00,000; Reserves and Surplus ₹ 3,00,000; Current Assets ₹ 1,50,000; Proprietary Ratio 0.8 : 1.

(a) ₹ 12,50,000
(b) ₹ 11,00,000
(c) ₹ 14,00,000
(d) ₹ 6,50,000

Ans – (b)

The proprietary Ratio falls under the group of

a) Liquidity Ratios
b) Solvency Ratios
c) Activity Ratios
d) Profitability Ratios

Ans – b)

__ ratios are calculated to determine the ability of the business to service its debt int he long run.

(a) Liquidity
(b) Turnover
(c) Solvency
(d) Profitability

Ans – (c)

The _ of a business firm is measured by its ability to satisfy its short term obligations as they become due.

(a) Activity
(b) Liquidity
(c) Debt
(d) Profitability

Ans – (b)

Current Ratio is a type of

(a) Solvency Ratio
(b) Liquidity Ratio
(c) Activity Ratio
(d) Profitability Ratio

Ans – (b)

Ratio analysis can help know about the potential areas which can be improved with the effort in the desired direction.

a) True
b) False
c) Can’t say
d) Partially true

Ans – b)

Ideal Quick Ratio is:

(a) 1 : 1
(b) 1 : 2
(c) 1 : 3
(d) 2 : 1

Ans – (a)

Quick Assets do not include

(a) Cash in Hand
(b) Prepaid Expenses
(c) Marketable Securities
(d) Trade Receivables

Ans – (b)

The Quick Ratio of a company is 1 : 2. Which of the following transactions will result in an increase in this ratio?

(a) Cash received from debtors
(b) Sold goods on credit
(c) Purchased goods on credit
(d) Purchased goods on cash

Ans – (b)

Current Assets do not include:

(a) Prepaid Expenses
(b) Inventory
(c) Goodwill
(d) Bills Receivable

Ans – (c)

Inventory Turnover Ratio falls under the group of

a) Activity Ratios
b) Solvency Ratios
c) Profitability Ratios
d) Liquidity Ratios

Ans – a)

Liquid Assets include:

(a) Debtors
(b) Bills Receivable
(c) Bank Balance
(d) All of the above

Ans – (d)

Patents and Copyrights fall under the category of:

(a) Current Assets
(b) Liquid Assets
(c) Intangible Assets
(d) None of above

Ans – (c)

What will be the current Ratio from the following:

Liquid Assets ₹ 1,00,000; Inventory ₹ 90,000 (including loose tools ₹ 15,000); Prepaid Expenses ₹ 5,000; Working Capital ₹ 1,20,000.

(a) 1.5 : 1
(b) 3,25 : 1
(c) 3 : 1
(d) 1.625 : 1

Ans – (c)

A Company’s Liquid Assets are ₹ 6,00,000, Inventory is ₹ 1,50,000 and its Current Liabilities are ₹ 4,00,000. Subsequently, it purchased goods for ₹ 1,00,000 on credit. Quick Ratio will be _ .

(a) 1.5 : 1
(b) 1.2 : 1
(c) 1.4 : 1
(d) 1.7 : 1

Ans – (b)

Current Ratio is 2 : 1 and Quick Ratio is 0.5 : 1, a transaction involving decrease in both Current Ratio and Quick Ratio is

(a) Sale of Non-Current Asset for Cash
(b) Sale of Stock-in-Trade at loss
(c) Cash payment of a Current Liability
(d) Purchase of Stock-in-Trade on credit

Ans – (d)

Working capital is the excess of current assets over current liabilities.

a) True
b) False
c) Can’t say
d) Partially true

Ans – a)

Trade Receivables ₹ 40,000; Trade Payables ₹ 60,000; Prepaid Expenses ₹ 10,000; Inventory ₹ 1,00,000 and Goodwill is ₹ 15,000. Current Ratio will be:

(a) 1 : 2
(b) 2 : 1
(c) 2.33 : 1
(d) 2.5 : 1

Ans – (d)

Cash Balance ₹ 5,000; Trade Payables ₹ 40,000; Inventory ₹ 50,000; Trade Receivables ₹ 65,000 and Prepaid Expenses are ₹ 10,000. Liquid Ratio will be:

(a) 1.75 : 1
(b) 2 :1
(c) 3.25 : 1
(d) 3 : 1

Ans – (a)

Proprietary Ratio = ?

(a) Equity Share Capital/Total Assets
(b) Equity Share Capital + Preference Share Capital/Fixed Assets
(c) Shareholders’ Funds/Total Assets + Fictitious Assets
(d) Shareholders’ Funds/Total Assets + Fictitious Assets

Ans – (c)

Share Capital ₹ 8,00,000; Reserve and Surplus ₹ 4,00,000; General Reserve ₹ 1,00,000 and Total Assets ₹ 20,00,000. Proprietary Ratio will be:

(a) 0.4 : 1
(b) 0.55 : 1
(c) 0.6 : 1
(d) 0.65 : 1

Ans – (c)

Paras Ltd. as a Proprietary Ratio of 25%. To maintain this ratio at 30%, management may

(a) Increase Equity
(b) Reduce Debt
(c) Either Increase Equity or Reduce Debt
(d) Increase Current Assets

Ans – (c)

Current Assets ₹ 4,00,000; Current Liabilities ₹ 2,00,000 and Inventory is ₹ 50,000. Liquid Ratio will be:

(a) 2 : 1
(b) 2.25 : 1
(c) 4 : 7
(d) 1.75 : 1

Ans – (d)

Assuming Current Ratio of 1.4 : 1, Which of the following transactions will improve the Current Ratio:

(a) Cash Collected from Trade Receivables
(b) Purchase of goods for cash
(c) Payment to Trade Payables
(d) Credit purchase of goods

Ans – (c)

Assuming quick ratio of 1.2 : 1, Which of the following transactions will improve the quick ratio?

(a) Sale of goods for cash
(b) Sale of goods on credit
(c) Issue of new shares for cash
(d) All of the above

Ans – (d)

A company’s Current Ratio is 2 : 1. After Cash payment to some of its creditors, Current Ratio will:

(a) Decrease
(b) Increase
(c) As before
(d) None of these

Ans – (b)

A Company’s Current Assets are ₹ 8,00,000 and its current liabilities are ₹ 4,00,000. Subsequently, it purchased goods for ₹ 1,00,000 on credit. Current Ratio will be __.

(a) 2 : 1
(b) 2.25 : 1
(c) 1.8 : 1
(d) 1.6 : 1

Ans – (c)

Cost of Revenue from Operations will be:

(a) ₹ 8,10,000
(b) ₹ 6,30,000
(c) ₹ 7,20,000
(d) ₹ 7,10,000

Ans – (b)

If Revenue from Operations of a firm is ₹ 15,00,000, Gross Profit is ₹ 9,00,000 and Operating Expenses are ₹ 75,000. The Operating Profit Ratio will be

(a) 45%
(b) 50%
(c) 55%
(d) 65%

Ans – (c)

Operating Profit Ratio will be:

(a) 22%
(b) 75%
(c) 32%
(d) 25%

Ans – (d)

Young India Ltd. has an operating Profit Ratio of 20%. To maintain this ratio at 25%, management may

a) Increase selling price of a stock in trade
b) Reduce the cost of Revenue from operations
c) Increase selling price of a stock in trade and reduce the cost of revenue
from operations
d) All of the above.

Ans – d)

A company’s Current Assets are ₹ 3,00,000 and its current liabilities are ₹ 2,00,000. Subsequenlty, it paid ₹ 50,000 to its trade payables. Current Ratio will be __ .

(a) 2 : 1
(b) 1.67 : 1
(c) 1.25 : 1
(d) 1.5 : 1

Ans – (b)

Current Assets of a company were ₹ 1,00,000 and its current ratio was 2 : 1. After this the company paid ₹ 25,000 to a Trade Payable. The Current Ratio after the payment will be:

(a) 5 : 1
(b) 2 : 1
(c) 3 : 1
(d) 4 : 1

Ans – (c)

Current liabilities of a company were ₹ 2,00,000 and its current ratio was 2.5 : 1. After this the company paid ₹ 1,00,000 to a trade payable. The current ratio after the payment will be:

(a) 2 : 1
(b) 4 : 1
(c) 5 : 1
(d) None of the above

Ans – (b)

The quick ratio ______ the short-term financial position.

a) Higher, better
b) Lower, better
c) Higher, poorer
d) Lower; Poorer

Ans – a)

Which of the following is/are not included in Current Assets to calculate Current Ratio?

(a) Loose Tools and Stores and Spares
(b) Trade receivables (after 12 months or after Operating Cycle period from the date of Balance Sheet)
(c) Prepaid Expenses
(d) Both (a) and (b)

Ans – (d)

_________ is considered as an ideal current ratio.

a) 1 : 1
b) 4 : 1
c) 2 : 1
d) There is no such value

Ans – c)

The current Ratio is 2 : 1. On the sale of a fixed asset (Book value ₹ 40,000) for ₹36,000 on credit, state whether the current Ratio will

a) improve
b) Decline
c) Not change
d) Can’t say

If opening inventory was one-third of closing inventory, the closing inventory will be:

(a) ₹ 2,25,000
(b) ₹ 4,50,000
(c) ₹ 4,00,000
(d) ₹ 1,50,000

Ans – (b)

On the basis of the following information, answer the question that follows:

The Proprietary Ratio is

(a) 1.25 : 1
(b) 0.69 : 1
(c) 2.5
(d) None of these

Ans – (b)

If average inventory is ₹ 5,00,000 and closing inventory is two times more than that in the beginning, then the value of closing inventory will be

(a) ₹ 10,00,000
(b) ₹ 7,50,000
(c) ₹ 9,00,000
(d) None of these

Ans – (b)

If the Cost of Revenue from Operations is ₹ 2,00,000, the value of Opening Inventory is ₹ 40,000 and the value of Closing Inventory is ₹ 60,000, the inventory Turnover Ratio will be equal to

(a) 5 Times
(b) 4 Times
(c) 3.33 Times
(d) 2 Times

Ans – (b)

The ‘Inventory Turnover Ratio’ from the following information will be:

Revenue from Operations – ₹ 12,00,000
Average Inventory – ₹ 2,00,000
Gross Loss Ratio – 20%

(a) 6 Times
(b) 5 Times
(c) 7.2 Times
(d) 3 Times

Ans – (c)

Calculate Opening Inventory from the following information:

Inventory Turnover Ratio : 5 Times
Revenue from Operations : ₹ 1,00,000
Gross Profit : 25% of Cost of Revenue from Operations
Opening Inventory is ₹ 5,000 less than Closing Inventory

Options:

(a) ₹ 19,500
(b) ₹ 17,500
(c) ₹ 13,500
(d) ₹ 12,500

Ans – (c)

Opening Inventory ₹ 80,000; Closing Inventory ₹ 1,20,000; Purchases ₹ 5,00,000; Carriage ₹ 30,000; Wages ₹ 20,000; Salaries ₹ 10,000; Inventory Turnover Ratio will be:

(a) 5.5 Times
(b) 5.2 Times
(c) 5.6 Times
(d) 5.1 Times

Ans – (d)

Revenue from Operations (Sales) ₹ 8,00,000. Average Inventory : 1,00,000; Closing Inventory ₹ 1,20,000. The rate of Gross Loss on Revenue from Operations was 10%. Inventory Turnover Ratio will be:

(a) 7.2 Times
(b) 8 Times
(c) 8.8 Times
(d) 6 Times

Ans – (c)

If opening inventory is ₹ 1,20,000, Cost of Revenue from Operations is ₹ 10,00,000 and Inventory Turnover Ratio is 5 Times. then Closing Inventory will be

a) ₹ 3,20,000
b) ₹ 2,80,000
c) ₹ 1,60,000
d) ₹ 4,00,000

A Company’s liquid assets are ₹ 10,00,000 and its current liabilities are ₹ 8,00,000. Subsequently, it purchased goods for ₹ 1,00,000 on credit. Quick ratio will be __ .

(a) 1.11 : 1
(b) 1.22 : 1
(c) 1.38 : 1
(d) 1.25 : 1

Ans – (a)

A Company’s liquid assets are ₹ 5,00,000 and its current liabilities are ₹ 3,00,000. Thereafter, it paid ₹ 1,00,000 to its trade payables. Quick ratio will be:

(a) 1.33 : 1
(b) 2.5 : 1
(c) 1.67 : 1
(d) 2 : 1

Ans – (d)

If current Ratio of a firm is 2.5:1 and its current liabilities are ₹ 4,00,000. Its working capital will be

a) ₹ 6,00,000
b) ₹ 7,50,000
c) ₹ 8,00,000
d) ₹ 14,00,000

Non-current assets of a firm are ₹ 26,00,000, Current Assets are ₹ 9,00,000 and Shareholder’s Funds are ₹ 21,50,000. Total debts of the firm will be.

a) ₹ 43,50,000
b) ₹ 13,50,000
c) ₹ 21,50,000
d) ₹ 38,50,000

Working Capital is ₹ 7,20,000; Trade Payables ₹ 40,000; Other current Liabilities ₹ 2,00,000; Calculate Current Ratio.

a) 2 : 1
b) 4 : 1
c) 5 : 1
d) 7 : 1

Current Assets are ₹ 10,00,000; Inventories ₹ 5,00,000; Working Capital ₹ 6,00,000. Calculate Current Ratio.

a) 2.5 : 1
b) 1 : 1
c) 2 : 1
d) 1 : 2

If Total Assets are ₹ 1,25,000, Total Debts, i.e., external debts are ₹ 1,00,000 and current liabilities are ₹ 50,000. Debt
Equity Ratio will be

a) 1 : 1
b) 1 : 2
c) 2 : 1
d) None of these

Ans – c)

If Credit Revenue from Operations of Gama Ltd. Is ₹ 3,50,000; Cash Revenue from Operations is ₹ 50,000, Cost of Revenue from Operations is ₹ 3,20,000, then its Gross Profit Ratio will be

(a) 15%
(b) 25%
(c) 16%
(d) 20%

Ans – (d)

On the basis of following data, a Company’s Gross Profit Ratio will be:

Net Profit ₹ 80,000; Wages ₹ 10,000; Office Expenses ₹ 30,000; Selling Expenses ₹ 20,000; Total Revenue from Operations ₹ 5,00,000.

(a) 28%
(b) 26%
(c) 4%
(d) 6%

Ans – (b)

If Credit Revenue from Operations is ₹ 7,00,000, Cash Revenue from Operations is ₹ 1,00,000. Cost of Revenue from Operations
is ₹ 6,40,000, then Gross Profit Ratio will be

a) 15%
b) 18%
c) 25%
d) 20%

Ans – d)

If Revenue from Operations is ₹ 1,60,000 and Gross Profit is ₹ 40,000, Gross Profit Ratio will be

a) 30%
b) 25%
c) 40%
d) 50%

Ans – b)

If Revenue from Operations is ₹ 2,50,000 and Gross Profit Ratio is 25%, the amount of Gross Profit will be

(a) ₹ 60,000
(b) ₹ 62,500
(c) ₹ 80,000
(d) ₹ 50,000

Ans – (b)

Name the difference between Revenue from Operations and Operating Profit:

(a) Gross Profit
(b) Operating Profit
(c) Operating Cost
(d) Net Profit before Tax

Ans – (c)

________ indicate the speed at which activities of the business are being performed.

(a) Liquidity Ratios
(b) Turnover Ratios
(c) Solvency Ratios
(d) Profitability Ratios

Ans – (b)

What will be the Operating Ratio of Zenia Ltd. from the particulars given below?

Revenue from Operations : ₹ 9,00,000
Gross Profit : 20% on cost
Operating Expenses : ₹ 60,000

(a) 86.67%
(b) 90%
(c) 76.67%
(d) 20%

Ans – (b)

Revenue from Operations (Sales) ₹ 8,00,000; G.P. 25% on Cost; Office Exp. ₹ 25,000; Selling Exp. ₹ 15,000; Loss on Sale of Plant ₹ 10,000. Operating Ratio will be:

(a) 85%
(b) 86.25%
(c) 80%
(d) 81.25%

Ans – (a)

Operating Ratio will be:

(a) 80%
(b) 84%
(c) 60%
(d) 64%

Ans – (a)

Revenue from Operations ₹ 9,00,000, Gross Profit 25% on Cost, Operating Expenses ₹ 90,000, Operating Ratio will be

a) 100%
b) 50%
c) 90%
d) 10%

Ans – c)

From the following, which ratio is not a part of Profitability Ratio:

(a) Proprietary Ratio
(b) Gross Profit Ratio
(c) Operating Ratio
(d) Net Profit Ratio

Ans – (a)

Which of the following will increase Quick Ratio without affecting Current Ratio?

(a) Sale of Stock at Loss
(b) Sale of Stock at Profit
(c) Sale of Non-Current Investment at Cost
(d) Sale of Stock at Cost

Ans – (d)

A higher total asset to debt ratio is beneficial as it indicates a larger
the safety margin for lenders.

a) True
b) False
c) Can’t say
d) Partially True

Ans – a)

A transaction involving a decrease in Debt-Equity Ratio and increase in Current Ratio is

a) Issue of Debentures against in purchase of fixed assets
b) Issue of Debentures for cash
c) Redemption of Preference shares for cash
d) Issue of Equity shares for cash

Ans – d)

_______ will result in increase in Liquid Ratio without affecting the Current Ratio.

(a) Sale of Stock at cost price
(b) Sale of Stock at loss
(c) Sale of stock at profit
(d) Sale of Investment at cost

Ans – (a)

_______ means the firm’s ability to meet its long-term liabilities.

a) Solvency
b) Liquidity
c) Efficiency
d) None of the above

Ans – a)

_____ is also known as Acid-Test Ratio.

(a) Current Ratio
(b) Quick Ratio
(c) Gross Profit Ratio
(d) Operating Ratio

Ans – (b)

A transaction involving an increase in Current Ratio but no change in Working Capital:

(a) Purchase of goods on credit
(b) Cash payment of Non-current Liability
(c) Payment to a Trade Creditor
(d) Sale of Fixed Assets for Cash

Ans – (c)

Which of the following formulae can be applied to calculate Equity?

P Capital Employed less Working Capital
Q Total Assets less Total Debts
R Share Capital + Reserves and Surplus + Working Capital
S Non-Current Assets + Working Capital less Non-Current Liabilities

(a) P and Q
(b) Q and S
(c) P, Q and R
(d) P, Q R and S

Ans – (b)

A transaction involving an increase in Debt-Equity Ratio and no change in Current Ratio is

(a) Issue of Debentures for cash
(b) Redemption of preference shares for cash
(c) Issue of shares for cash
(d) Issue of Debentures against the purchase of a fixed asset

Ans – (d)

Shareholders’ Funds or Equity is

(a) Equity Share Capital + Preference Share Capital + Reserves and Surplus
(b) Share Capital + Reserves and Surplus
(c) Non-Current Assets + Current Assets – Current Liabilities – Non-Current Liabilities
(d) All of the above

Ans – (d)

Which of the following four companies is not deriving the benefit of ‘trading on equity’?

(a) Mars Ltd., which has a Debt-Equity Ratio of 0.49 : 1
(b) Venus Ltd., which has a Debt-Equity Ratio of 1.54 : 1
(c) Saturn Ltd., which has a Debt-Equity Ratio of 1.62 : 1
(d) Pluto Ltd., which has a Debt-Equity Ratio of 2.32 : 1

Ans – (a)

If Capital Employed is ₹ 4,00,000, Total Debt is ₹ 2,50,000 and Current Liability is ₹ 1,00,000, Debt-Equity Ratio will be

(a) 5 : 3
(b) 3 : 5
(c) 1 : 1
(d) 8 : 5

Ans – (b)

Which of the following ratios measure the short term solvency of an

a) Current Ratio
b) Liquid Ratio
c) Debt Equity Ratio
d) Both a) and b)

Ans – d)

Working Capital Turnover Ratio falls under the group of

a) Activity Ratios
b) Solvency Ratios
c) Liquidity Ratios
d) Profitability Ratios

Ans – a)

Fixed Assets ₹ 3,00,000; Liquid Assets ₹ 1,80,000; Inventory ₹ 70,000; Current Liabilities ₹ 50,000; Cost of Revenue from Operations ₹ 8,00,000; G.P. 25% of Cost. Working Capital Turnover Ratio will be:

(a) 2 times
(b) 4.8 times
(c) 4 times
(d) 5 times

Ans – (d)

A transaction involving decrease in both Current Ratio and Quick Ratio is

(a) Sale of Non-Current Asset for Cash
(b) Sale of Stock-in-Trade at loss
(c) Cash payment of a Non-Current Liability
(d) Purchase of Stock-in-Trade (goods) on credit

Ans – (c)

A transaction involving decrease in Current Ratio and an increae in Quick Ratio:

(a) Purchase of Stock-in-Trade for cash
(b) Sale of Non-Current Assets for Cash
(c) Sale of Stock-in-Trade at loss
(d) Cash payment of Non-current Liability

Ans – (c)

A transaction involving increase in both current Ratio and Quick Ratio:

(a) Purchase of Stock-in-Trade on Credit
(b) Sale of Stock at Loss
(c) Cash payment of Non-current Liability
(d) Sale of Non-current Asset for Cash

Ans – (d)

Operating Ratio will be:

(a) 70%
(b) 85%
(c) 90%
(d) 95%

Ans – (b)

_____________ + Operating Profit ratio (%) = 100.

a) Operating Ratio (%)
b) Gross Profit Ratio
c) Net Profit Ratio
d) None of these

Ans – a)

____________ Provides an approximation of the average time that it takes to collect debtors.

a) Average Collection period
b) Average payment period
c) Debtors turnover ratio
d) None of the above

Ans – a)

Name the aggregate of Shareholders’ Funds and Total Debts:

(a) Total Debts
(b) Capital Employed
(c) Total Assets
(d) Non-Current Assets

Ans – (c)

In calculating Interest Coverage Ratio, net profit considered is

(a) Profit after Tax
(b) Profit after Interest
(c) Profit before Tax
(d) Profit before Interest and Tax

Ans – (d)

From the following, Calculate Interest Coverage Ratio:

Net Profit after Tax ₹ 12,00,000; 10% Debentures ₹ 1,00,00,000; Tax Rate 40%.

(a) 1.2 Times
(b) 3 Times
(c) 2 Times
(d) 5 Times

Ans – (b)

Bhumi Ltd. has a Current Ratio of 3 : 1. if its stock is ₹ 40,000 and total current liabilities are ₹ 75,000, the amount of Current Assets of Bhumi Ltd. will be

(a) ₹ 75,000
(b) ₹ 2,25,000
(c) ₹ 25,000
(d) ₹ 98,500

Ans – (b)

While calculating Return on Investment, net profit before interest and tax will not include

(a) Interest on Trade Investment
(b) Interest on Non-trade Investment
(c) Neither (a) nor (b)
(d) Commission received by a company

Ans – (b)

Return on Investment falls under the group of

a) Liquidity Ratios
b) Profitability Ratios
c) Solvency Ratios
d) Activity Ratios

Ans – b)

Operating Ratio falls under the group of

a) Activity Ratios
b) Liquidity Ratios
c) Solvency Ratios
d) Profitability Ratios

Ans – d)

Which one of the following is correct?

(i) Quick Ratio can be more than Current Ratio
(ii) High Inventory Turnover Ratio is good for the organisation, except when goods are bought in small lots or sold quickly at low margins to realise cash.
(iii) Sum of Operating Ratio and Operating Profit Ratio is always 100%
(iv) Sum of Operating Ratio and Operating Profit Ratio is always 100%

(a) All are correct
(b) Only (i) and (iii) are correct
(c) Only (ii) and (iii) are correct
(d) Only (i) and (ii) are correct

Ans – (c)

From the following information, calculate Return on Investment (ROI):

(a) 27%
(b) 22%
(c) 19.85%
(d) 15%

Ans – (a)

Net Profit after Interest and Tax of X Ltd. was ₹ 1,20,000. Its Current Assets were ₹ 6,00,000 and Current Liabilities were ₹ 2,00,000. Tax rate was 40%. its Total Assets were ₹ 12,00,000 and 10% Long Term Debts was ₹ 4,00,000.

Return on Investment will be:

(a) 15%
(b) 24%
(c) 34%
(d) 60%

Ans – (b)

Which of the following is not a type of Accounting Ratio?

(a) Statement of Profit and Loss Ratio
(b) Statement of Cash Flow Ratio
(c) Balance Sheet Ratio
(d) Composite Ratio

Ans – (B)

Net Profit after Interest but before Tax ₹ 30,000; Shareholders’ Funds ₹ 3,00,000; 10% Long-term Debt ₹ 1,00,000. Tax Rate was 40%. Return on Investment will be:

(a) 10%
(b) 12.5%
(c) 15%
(d) 21.25%

Ans – (a)

Net Profit after tax is ₹ 1,20,000; 10% Debentures are of ₹ 2,00,000; Capital Employed is ₹ 16,00,000. Rate of Tax 40%.

Return on Investment (ROI) will be

(a) 20%
(b) 25%
(c) 22%
(d) 13.75%

Ans – (d)

Sincere Ltd. has Proprietary Ratio of 25%. To maintain this ratio of 30% management may

(a) Increase Equity
(b) Reduce Debt
(c) Either Increase Equity or Reduce Debt
(d) Increase Current Assets

Ans – (c)

The correct formula for computing Earning Per share is:

(a) Net Profit after Tax/No. of Shares
(b) Net Profit after Tax and Preference Dividend/No. of Shares
(c) Net Profit after Tax and Preference Dividend/No. of Equity Shares
(d) Net Profit after Tax and Preference Dividend/No. of Preference Shares

Ans – (c)

Which ratio can be used as basis for predicting the future value of equity shares?

(a) Price Earning Ratio
(b) Earning Per Share (EPS)
(c) Neither (a) nor (b)
(d) Dividend Yield Ratio

Ans – (a)

From the following information, the ‘Proprietor’s Funds’ are:

Proprietary Ratio

(a) ₹ 10,00,000
(b) ₹ 14,00,000
(c) ₹ 24,00,000
(d) ₹ 15,00,000

Ans – (d)

On the basis of following data, the proprietary ratio of a Company will be:

Equity Share Capital ₹ 6,00,000; Debentures ₹ 2,40,000; Statement of Profit and Loss Debit Balance ₹ 40,000.

(a) 74%
(b) 65%
(c) 82%
(d) 70%

Ans – (d)

On the basis of following information received from a firm, its Proprietary Ratio will be:

Non-Current Assets ₹ 3,30,000; Current Assets ₹ 1,90,000; Preliminary Expenses ₹ 30,000; Equity Share Capital ₹ 2,44,000; Preference Share Capital ₹ 1,70,000; Reserve Fund ₹ 58,000.

(a) 70%
(b) 80%
(c) 85%
(d) 90%

Ans – (c)

On the basis of following data, a Company’s Total Assets-Debt Ratio will be: Working Capital ₹ 4,50,000; Current Liabilities ₹ 1,50,000; Non-Current Assets ₹ 4,00,000; Debentures ₹ 2,00,000; Long Term Bank Loan ₹ 50,000.

(a) 5 : 1
(b) 4 : 1
(c) 2.5 : 1
(d) 20 : 1

Ans – (b)

On the basis of following information received from a firm, its Total Assets-Debt Ratio will be:

Shareholders’ Funds ₹ 2,00,000; Dr. Balance of Profit and Loss ₹ 50,000; Current Liabilities ₹ 1,00,000; Current Assets ₹ 2,00,000; Total Assets ₹ 6,00,000.

(a) 2 : 1
(b) 1.5 : 1
(c) 3 : 1
(d) 1.71 : 1

Ans – (a)

Which ratio indicates the proportion of assets financed out of shareholders’ funds?

(a) Debt Equity Ratio
(b) Fixed Assets Turnover Ratio
(c) Proprietary Ratio
(d) Total Assets to Debt Ratio

Ans – (c)

Long term solvency is indicated by:

(a) Current Ratio
(b) Quick Ratio
(c) Net Profit Ratio
(d) Debt/Equity Ratio

Ans – (d)

The formula for calculating the Debt Equity Ratio is:

(a) Short-term Debts/Shareholders’ Funds
(b) Shareholders’ Funds/Non-Current Assets
(c) Short term + Long Term Debts/Shareholders’ Funds
(d) None of the above

Ans – (d)

Equity Share Capital ₹ 20,00,000; Reserve 5,00,000; Debentures ₹ 10,00,000; Current Liabilities ₹ 8,00,000. Debt-equity ratio will be:

(a) .4 : 1
(b) .32 : 1
(c) .72 : 1
(d) .5 : 1

Ans – (a)

Shareholder’s Funds will be:

(a) ₹ 20,00,000
(b) ₹ 28,80,000
(c) ₹ 30,00,000
(d) ₹ 32,50,000

Ans – (a)

Debt equity ratio of a company is 1 : 2. which of the following transactions will increase it:

(a) Issue of new shares for cash
(b) Redemption of Debentures
(c) Issue of Debentures for Cash
(d) Goods Purchased on credit

Ans – (c)

Satisfactory ratio between Long-term Debts and Shareholders’ Funds is:

(a) 1 : 1
(b) 3 : 1
(c) 1 : 2
(d) 2 : 1

Ans – (d)

Long-term Debts will be:

(a) ₹ 9,60,000
(b) ₹ 60,00,000
(c) ₹ 65,00,000
(d) ₹ 62,50,000

Ans – (b)

Debt Equity Ratio is:

(a) Liquidity Ratio
(b) Solvency Ratio
(c) Activity Ratio
(d) Operating Ratio

Ans – (b)

Debt Equity Ratio is:

(a) Long Term Debts/Shareholders’ Funds
(b) Short Term Debts/Equity Capital
(c) Total Assets/Long term Debts
(d) Shareholder’s Funds/Total Assets

Ans – (a)

Which of the following is not a Solvency Ratio?

(a) Interest Coverage Ratio
(b) Return on Investment
(c) Debt to Capital Employed Ratio
(d) Total Asset to Debt Ratio

Ans – (b)

A lower trade receivable ratio indicates the inefficient credit sales policy
of the management.

a) True
b) False
c) Can’t say
d) Partially true

Ans – a)

The purchase of goods ₹ 40,000 for cash will increase the operating ratio.

a) True
b) False
c) Can’t say
d) Partially True

Ans – a)

Revenue from Operations ₹ 10,00,000, Average Inventory ₹ 1,25,000, Gross Loss on Sales 25%. Find Inventory Turnover Rati.

(a) 8 Times
(b) 10 Times
(c) 2 Times
(d) None of these

Ans – (b)

Proprietary Ratio is:

(a) Long term Debts/Shareholders’ Funds
(b) Total Assets/Shareholders’ Funds
(c) Shareholders’ Funds/Total Assets
(d) Shareholders’ Funds/Non-Current Assets

Ans – (c)

Non-Current Assets ₹ 5,00,000; Current Assets ₹ 3,00,000; Equity Share Capital ₹ 4,00,000; Reserve ₹ 2,00,000; Long-term Debts ₹ 40,000. Proprietary Ratio will be:

(a) 75%
(b) 80%
(c) 125%
(d) 133%

Ans – (a)

If Debts equity ratio exceeds __, it indicates risky financial position.

(a) 1 : 1
(b) 2 : 1
(c) 1 : 2
(d) 3 : 1

Ans – (b)

In Debts Equity Ratio, Debt refers to:

(a) Short term Debts
(b) Long Term Debts
(c) Total Debts
(d) Debentures and Current Liabilities

Ans – (b)

Proprietary Ratio indicates the relationship between Proprietor’s Funds and _______ .

(a) Long-term Debts
(b) Short Term and Long Term Debts
(c) Total Assets
(d) Debentures

Ans – (c)

To assess the Operating efficiency with which resources are utilised, we may use

(a) Gross Profit Ratio
(b) Inventory Turnover Ratio
(c) Working Capital Turnover Ratio
(d) (b) & (c)

Ans – (d)

Provision for Doubtful Debts is deducted from Trade Receivables while computing

a) Current Ratio
b) Quick Ratio
c) Trade Receivables Turnover Ratio
d) a) and b)

Ans – d)

If current assets and current liabilities are both reduced by the same amount, the current ratio will

a) increase
b) Decrease
c) No change
d) Either a) or b)

Ans – a)

Inventory in the beginning of the year is ₹ 1,20,000 and at the end is ₹ 2,00,000. Inventory Turnover Ratio is 8 Times. The Revenue from Operations is 25% above cost. The Gross Profit will be

(a) ₹ 2,40,000
(b) ₹ 3,20,000
(c) ₹ 4,00,000
(d) ₹ 3,60,000

Ans – (b)

Which of the following are known as Efficiency Ratios?

(a) Liquidity Ratio
(b) Solvency Ratio
(c) Activity Ratios
(d) Profitability Ratios

Ans – (c)

From the following information, calculate Proprietary Ratio: Share Capital ₹ 5,00,000, Non-Current Assets ₹ 22,00,000,
Reserves and Surplus ₹ 3,00,000, Current Assets ₹ 10,00,000.

a) 100%
b) 70%
c) 40%
d) 25%

Ans – d)

Given that:

Opening Inventory – ₹ 1,20,000
Purchases – ₹ 9,00,000
Return Outward – ₹ 40,000

and the closing inventory is ₹ 20,000 less than opening inventory, then, Inventory Turnover Ratio is:

a) 5 Times
b) 7 Times
c) 8 Times
d) 10 Times

Ans – c)

If LR Ltd has Total Debts of ₹ 3,70,000, Long Term Debts of ₹ 2,00,000 and working capital of ₹ 1,80,000 then its current Ratio
will be _ .

a) 2.6 : 1
b) 3.2 : 1
c) 2.06 : 1
d) 1.03 : 1

Ans – c)

A firm’s current ratio is 1.75 : 1. If current liabilities are ₹ 80,000, then its working capital will be:

a) ₹ 1,20,000
b) ₹ 1,60,000
c) ₹ 60,000
d) ₹ 2,80,000

Ans – c)

A firm’s working capital is ₹ 90,000. Its current ratio is 3.5 : 2. Its current assets will be:

a) ₹ 1,35,000
b) ₹ 3,15,000
c) ₹ 2,10,000
d) ₹ 1,80,000

Ans – c)

A firm’s current assets are ₹ 3,60,000, current ratio is 3 : 1. Cost of revenue from operations is ₹ 12,00,000. Its working
capital turnover ratio will be:

a) 3 times
b) 5 times
c) 8 times
d) 4 times

Ans – b)

Given that:

Current Ratio 2.5
Quick Ratio 1.5
Working Capital ₹60,000

The value of current liabilities will be:

a) ₹ 15,000
b) ₹ 40,000
c) ₹ 60,000
d) ₹ 1,00,000

Ans – b)

The current ratio of Vidur Pvt Ltd is 3:2. The accountant wants to maintain it at 2:1. Following options are available.

i) He can repay bills payable
ii) He can take short term loan
iii) He can purchase goods on credit

Choose the correct option.

a) Only i) is correct
b) only ii) is correct
c) only i) and iii) are correct
d) Only ii) and iii) are correct

Ans – a)

The net revenue from operations of venus Ltd. is ₹ 35,00,000. Its Gross Profit is ₹ 22,50,000, Operating expenses are ₹ 1,87,500, commission received is ₹ 12,500 and profit on sale of fixed assets is ₹ 25,000. The operating Profit Ratio of Venus Ltd. will be

(a) 59. 29%
(b) 58.29%
(c) 60%
(d) 58.93%

Ans – (a)

The particulars of Alpha Ltd. are given below:

(A) The Interest Coverage Ratio of the company will be

(a) 1.8 times
(b) 2.8 times
(c) 3.4 times
(d) 2.4 times

Ans – (c)

(B) The Proprietary Ratio of the company will be

(a) 0.47 : 1
(b) 0.75 : 1
(c) 0.61 : 1
(d) 0.38 : 1

Ans – (b)

The operating profit ratio is classified under the group of

a) Profitability Ratios
b) Solvency Ratios
c) Liquidity Ratios
d) Activity Ratios

Ans – a)

The difference between Total Assets and Current liabilities is

a) Total Assets
b) Total Debts
c) Capital Employed
d) Shareholders Funds

Ans – c)

A ratio reflects quantitative as well as qualitative aspects of results.

a) True
b) False
c) Can’t say
d) Partially True

Ans – b)

Ratios are comparable even if different accounting policies and procedures
are followed by different firms

a) True
b) False
c) Can’t say
d) Partially true

Ans – b)

Raj Ltd. has a Current Ratio of 3 : 1. If its Stock is ₹ 40,000 and total Current Liabilities are ₹ 75,000, the amount of Quick Assets of Raj Ltd. will be

(a) ₹ 1,85,000
(b) ₹ 1,75,000
(c) ₹ 1,65,000
(d) ₹ 1,50,000

Ans – (a)

The aggregate of Non-current Assets and Current Asset is

a) Quick Assets
b) Total Assets
c) Total Debts
d) Capital Employed

Ans – b)

Liquidity ratios assess the enterprise’s ability to meet its _
financial obligations.

a) Short term
b) Long term
c) Both a) and b)
d) None of these

Ans – a)

What will be the effect on the current ratio if a bills payable is discharged on
maturity.

a) it will increase
b) it will decrease
c) Either a) or b)
d) Can’t say

Ans – a)

Which of the following is not true?

a) Gross profit = Revenue from operations – Cost of Revenue from operations
b) Operating Profit = Revenue from Operations – Operating Cost.
c) Equity – Total Assets – Total Debts
d) Equity = Capital Employed + Debt

Ans – d)

A transaction involving a decrease in both current Ratio and Quick Ratio is

a) Sale of Noncurrent Asset for cash
b) Sale of Stock in Trade at a loss
c) Cash payment of a Non-current Liability
d) Issue of Bonus Shares

Ans – c)

Which of the following is/are not the components of quick assets.

a) Inventories
b) Prepaid expenses
c) Cash and cash equivalents
d) Both a) and b)

Ans – d)

Which of the following ratios measure the long-term solvency of an organization.

a) Debt-quity ratio
b) Liquid ratio
c) Proprietary ratio
d) Both a0 and c)

Ans – d)

From the given particulars of Zee Ltd., the Trade Receivables Turnover Ratio of the company will be:

(a) 3.75 times
(b) 4 times
(c) 4.17 times
(d) 8 times

Ans – (b)

Which of the following is not an Activity Ratio?

a) Inventory Turnover Ratio
b) Interest coverage Ratio
c) Working Capital Turnover Ratio
d) Trade Receivables Turnover Ratio

Ans – b)

The is a measure of liquidity which excludes _______ generally the least liquid asset.

a) Current ratio, trade receivables
b) liquid ratio, trade receivables
c) current ratio, inventory
d) liquid ratio, inventory

Ans – d)

A very high current ratio implies heavy investment in current assets which is not a good sign
as it reflects under-utilization or improper utilization of resources.

a) True
b) False
c) Can’t say
d) Partially true

Ans – a)

The debt Equity ratio is the relationship between

a) Long term debts and share capital
b) Long term debts and shareholders Funds
c) Long term debts and Total Assets
d) Long term debts and working capital

Ans – b)

Interest Coverage Ratio is the relationship between

a) Net Profit and interest charge
b) Gross Profit and interest charge
c) Profit before interest and tax and interest on long term Borrowings
d) Profit after interest and tax and interest on Long term Borrowings

Ans – c)

Purchase of machinery for cash will _ the quick ratio.

a) increase
b) Decrease
c) No change
d) Either a) or b)

Ans – b)

Generally, a lower current ratio is considered better.

a) True
b) False
c) Can’t say
d) Partially True

Ans – b)

The difference between Revenue from Operations and Operating Profit is

a) Gross Profit
b) Operating Profit
c) Operating cost
d) Net Profit before tax

Ans – c)

Out of the following, a ratio that is not a part of the Profitability Ratio is

a) Proprietary Ratio
b) Gross Profit Ratio
c) Operating Ratio
d) Net Profit Ratio

Ans – a)

If Share Capital ₹ 4,00,000, Reserves and Surplus ₹ 1,50,000, Non-current Assets ₹ 18,00,000, Current Assets ₹ 4,00,000,
then proprietary ratio will be:

a) 12%
b) 25%
c) 8.33%
d) None of the above

Ans – b)

The ______ ratio provides information critical to the long-run operation of the firm.

a) Liquidity
b) activity
c) solvency
d) Profitability

Ans – c)

1:1 is the ideal quick ratio

a) True
b) False
c) Can’t say
d) Partially true

Ans – a)

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

Ans – a)

_______ ratios are calculated for measuring the efficiency of operations of business based on effective utilization of resources.

a) Liquidity ratios
b) Solvency ratios
c) Activity ratios
d) None of these

Ans – c)

Inventory turnover ratio shows the relationship between the _ during a given period and the _ carried during the period.

a) Cost of revenue from operations: average inventory.
b) cost of revenue from operations, closing inventory
c) cost of revenue from operations, opening inventory
d) None of the above

Ans – a)

Name the difference between Capital Employed and Non-current Liabilities.

a) Shareholder’s funds
b) Capital Employed
c) Total Debts
d) Total Assets

Ans – a)

The profitability Ratio in relation to investment is

a) Gross Profit Ratio
b) Operating Profit Ratio
c) Operating Ratio
d) Return on Investment

Ans – d)

If P Ltd obtains a Bank loan of ₹ 30,00,000 payable after 5 years, then its proprietary ratio will

a) Increase
b) Decrease
c) No change
d) Either a) or b)

Ans – b)

The debt-equity ratio expresses the relationship between short-term debt and equity share capital of an enterprise.

a) True
b) False
c) can’t say
d) Partially True

Ans – b)

The objective of the Current Ratio is

a) To assess the firm’s ability to meet its short-term liabilities on time.
b) To assess the ability of the firm to meet its current liabilities
immediately
c) To assess the ability of the firm to meet its long term liabilities
d) to measure the proportion of total assets funded by the shareholders

Ans – a)

The ratio that measures the relationship between operating profit and Revenue from operations are

a) Operating Ratio
b) Operating Profit Ratio
c) Gross Profit ratio
d) Net Profit Raito

Ans – b)

Purchase returns amounting to ₹ 20,000 will deteriorate the inventory turnover ratio.

a) True
b) False
c) Can’t say
d) Partially true

Ans – b)

________ are especially interested in the average payment period since it provides them with a sense of the bill paying patterns of the firm.

a) Customers
b) Stockholders
c) Lenders and suppliers
d) Borrowers and buyers

Ans – c)

Which of the following is not correct?

a) Equity = Capital Employed + Debt
b) Equity = Share capital + Reserves and Surplus
c) Debt = Long term Borrowings + Long term provisions
d) Working Capital = Current Assets – Current Liabilities

Ans – a)

A transaction that does not change both the Current Ratio and Quick Ratio is

a) Sale of Stock in Trade at a loss
b) Cash payment of a Non-current liability
c) Cash received from trade debtors
d) Sale of furniture for cash

Ans – c)

Low __ may be due to bad buying behavior, obsolete stock, and is a danger signal.

a) average payment period
b) Inventory turnover ratio
c) average collection period
d) quick ratio

Ans – a)

A very high working capital turnover ratio may be a sign of _________

a) under-trading
b) overtrading
c) Optimal-trading
d) None of these

Ans – b)

The _____ may indicate that the firm is experiencing stockouts and lost sales.

a) Average Payment Period
b) Inventory Turnover Ratio
c) Average Collection Period
d) Quick Ratio

Ans – b)

While computing the current Ratio, Current Assets does not include:

a) Loose tools and stores and spares
b) Provision for Bad Debts
c) Prepaid Expenses
d) Both a) and b)

Ans – d)

The ________ ratios are primarily measures of return.

a) activity
b) profitability
c) liquidity
d) debt

Ans – b)

Interest coverage ratio depicts the relationship between net profit before interest and tax and interest payable on long-term debts.

a) True
b) False
c) can’t say
d) Partially true

Ans – a)

If Current Assets are ₹ 12,00,000; working Capital is ₹ 7,20,000; Inventories are ₹ 3,60,000, Liquid Ratio will be:

(a) 2.5 : 1
(b) 1 : 1
(c) 1.75 : 1
(d) 2 : 1

Ans – (c)

Which of the following will increase the liquid ratio without affecting current
ratio?

a) Sale of stock at a loss
b) Sale of stock at a profit
c) Sale of investment at cost
d) Sale of stock at cost

Ans – d)

A company extends credit terms of 45 days it its customers, its credit collection would be considered poor if its average
collection period was:

a) 30 days
b) 52 days
c) 41 days
d) 36 days

Ans – b)

Cost of Revenue from operations ₹ 15,00,000, Current Assets ₹ 4,00,000, Current Liabilities ₹ 1,50,000. Find its Working
Capital Turnover Ratio.

a) 3.75 times
b) 5 times
c) 6 times
d) 10 times

Ans – c)

If selling price is fixed 25% above the cost, the Gross Profit Ratio is:

a) 13%
b) 28%
c) 26%
d) 20%

Ans – d)

Net Revenue from Operation ₹ 4,00,000, Average inventory ₹ 50,000, Gross Loss on sales 25%. Find Inventory Turnover Ratio:

a) 8 times
b) 10 times
c) 2 times
d) None of these

Ans – b)

A Company’s Current Ratio is 3 : 1; Current Liabilities are ₹ 2,00,000; Inventories are ₹ 1,50,000 and Prepaid Expenses are ₹
10,000. Its Liquid Ratio will be:

a) 3.6 : 1
b) 2.2 : 1
c) 3 : 2
d) 2.05 : 1

Ans – b)

A firm’s current ratio is 1.8 : 1. Its current liabilities are ₹ 80,000. Its working capital will be:

a) ₹ 1,20,000
b) ₹ 1,60,000
c) ₹ 64,000
d) ₹ 2,80,000

Ans – c)

Current Assets ₹ 77,000; Inventory ₹ 22,000; Prepaid Expenses ₹ 2,500 and Current Ratio is 2.2:1; then Liquid Ratio will be:

a) 3 : 1
b) 1.5 : 1
c) 1 : 1
d) None of these

Ans – b)

Which of the following will reduce the current ratio?

a) Payment of Bills payable on maturity
b) Conversion of debentures into equity shares
c) Declaration of final dividend
d) Issue of bonus shares

Ans – c)

The _______ is useful in evaluating credit and collection policies.

a) Average payment period
b) current ratio
c) average collection period
d) current asset turnover

Ans – c)

Profitability ratios help in assessing the overall efficiency with which a business is being managed.

a) True
b) False
c) Can’t say
d) Partially true

Ans – a)

Total Assets to debt ratio is a:

a) Profitability Ratio
b) Solvency Ratio
c) Activity Ratio
d) Liquidity Ratio

Ans – b)

Total Assets to Debt Ratio will be:

(a) 2.5 : 1
(b) 1.33 : 1
(c) 1.5 : 1
(d) 2.22 : 1

Ans – (c)

Which of the following will have no effect on the Debt Equity Ratio?

a) Purchase of fixed asset by taking long term loan
b) Conversion of debentures into shares
c) Issue of bonus shares
d) Sale of fixed assets at a loss

Ans – c)

The interest coverage ratio is given by:

a) Net Profit/Interest on long term borrowing
b) Long term borrowings/Interest on long term borrowings
c) Profit before interest and tax/interest on long term borrowings
d) Profit before Tax/Interest on long term borrowings

Ans – c)

The total assets to debt ratio establish a relationship between ______ and _____ .

a) total assets; total long term debts
b) total assets; total debts
c) non-current assets; total long term debts
d) None of the above

Ans – a)

______ the ratio shows the extent to which the total assets have been financed by the proprietor.

a) Proprietary ratio
b) Debt equity ratio
c) Total assets to debt ratio
d) None of the above

Ans – a)

Which of the ratios show how efficiently a company’s resources are used?

a) Profitability Ratio
b) Solvency Ratio
c) Activity Ratio
d) Liquidity Ratio

Ans – c)

To calculate the trade receivable turnover ratio __ is divided by average trade receivables.

a) Gross Revenue from Operations
b) Net Revenue from Operations
c) Net Credit Revenue from Operations
d) Net Cash Revenue from Operations

Ans – c)

A rise in the operating ratio will indicate a rise in inefficiency.

a) True
b) False
c) Can’t say
d) Partially true

Ans – b)

Which ratio indicates the speed with which amount is being paid to the creditors?

a) Trade payables turnover ratio
b) Trade receivables ratio
c) Inventory turnover ratio
d) None of the above

Ans – a)

Which ratio is complementary to each other?

a) Current and Liquid Ratio
b) Operating and Operating Profit Ratio
c) Gross and Net profit ratio
d) Trade Receivable and Trade Payable

Ans – b)

The best definition of capital employed in calculating the rate of return on investment is:

a) Current Assets + Gross Fixed Assets
b) Current Assets + Non-current Assets
c) Working capital + Gross Fixed Assets
d) Working Capital + Non-Current Assets

Ans – d)

Which of the following formulas is used to calculate working capital turnover ratio?

a) revenue from operations/current assets
b) Revenue from operations/COGS
c) Gross Sales/COGS
d) Revenue from operations/current assets current liabilities

Ans – d)

Which of the following groups of ratios primarily measure risk?

a) Liquidity, activity, and profitability
b) Liquidity, activity, and common stock
c) Liquidity, activity, and debt
d) Activity, debt, and profitability

Ans – c)

Collection of debtors will ________ .

a) Decreases current ratio
b) increases the current ratio
c) has no effect on the current ratio
d) none of the above

Ans – c)

A transaction involving a decrease in Debt-Equity ratio and an increase in Current Ratio is:

a) Issue of Debentures against the purchase of fixed assets
b) Redemption of preference shares for cash
c) Issue of shares for cash
d) Issue of debentures for cash

Ans – c)

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

Ans – d)

What will be the current ratio of a company whose net working capital is Zero?

a) 1:1
b) 0
c) 1.5
b) Can’t say

Ans – a)

If 365 is divided by the Inventory Turnover ratio, it becomes a measure of:

a) Revenue from Operations Efficiency
b) Average Collection period
c) Average age of Inventory
d) Revenue from Operations Turnover

Ans – c)

Which of the following measures the earning available to an equity shareholder on a per share basis?

(a) Dividend Per share
(b) Earning Per Share (EPS)
(c) Net Profit per share
(d) None of these

Ans – (b)

The ______ indicates the percentage of each sales rupee remaining after the firm has paid the cost of goods sold.

a) Net profit margin
b) Gross Profit Margin
c) Operating Cost Margin
d) Earnings available to equity shareholders

Ans – b)

The _______ may indicate that the firm is experiencing stockouts and lost sales.

a) Average payment method
b) Inventory turnover ratio
c) Average Collection period
d) Quick ratio

Ans – b)

What will be the effect of the purchase of goods for cash ₹3000 on gross profit ratio?

a) It will increase
b) It will decrease
c) Either a) or b)
d) No change

Ans – b)

Total Revenue from Operations ₹ 15,00,000; Cost of Revenue from Operations ₹ 9,00,000 and Operting Expenses ₹ 2,25,000. Operating
Ratio will be:

a) 75%
b) 25%
c) 60%
d) 15%

Ans – a)

A firm has current ratio of 5 : 2. Its Current Assets are ₹ 6,50,000 and Inventories ₹ 26,000. The liquid ratio of the fimr is:

a) 2.8 : 1
b) 2.4 : 1
c) 5:3:2
d) None of these

Ans – b)

Current Assets of a concern are ₹ 7,00,000. Its current ratio is 7:2 and liquid ratio is 3:1. The value of its liquid assets is:

a) ₹4,00,000
b) ₹6,00,000
c) ₹80,000
d) None of these

Ans – b)

In a concern, Total Assets to Debt Ratio is 3:1. Its total assets are ₹ 12,00,000 and current liabilities are ₹80,000. Its
equity is of:

a) ₹ 2,40,000
b) ₹ 6,00,000
c) ₹ 7,20,000
d) None of these

Ans – c)

The higher the ratio, the more favorable it is, does not stand true for:

a) Liquidity Ratio
b) Net profit Ratio
c) Operating Ratio
d) Inventory turnover Ratio

Ans – c)

Two basic measures of liquidity are:

a) Inventory turnover and a current ratio
b) Current ratio and Quick ratio
c) Gross Profit ratio and Operating ratio
d) Current ratio and Average Collection period

Ans – b)

The sale of goods on credit for ₹67,000 will increase the gross profit ratio. Is this statement true?

a) True
b) False
c) Can’t say
d) Partially True

Ans – a)

Liquid Assets do not include:

a) Bills Receivable
b) Debtors
c) Inventory
d) Bank Balance

Ans – c)

The difference between Operating costs and Operating Expenses is:

a) Operating profit
b) Net profit
c) Cost of revenue from operations
d) None of these

Ans – c)

Which of the following is expressed as a pure ratio?

a) Inventory turnover ratio
b) quick ratio
c) Gross Profit ratio
d) None of these

Ans – b)

Which of the following ratios is expressed in times?

a) Inventory turnover ratio
b) Current ratio
c) Net profit ratio
d) None of these

Ans – a)

To assess the efficiency of inventory management in the business, we may use:

a) Operating profit ratio
b) Current ratio
c) Inventory Turnover ratio
d) Debt Equity ratio

Ans – c)

Working capital is the :

a) Cash and bank balance
b) Loans borrowed from the banks
c) Difference between current assets and current liabilities
d) Difference between current assets and fixed assets

Ans – c)

Current assets include only those assets which are expected to be realized within:

a) 3 months
b) 6 months
c) 9 years
d) 2 years

Ans – a)

Which of the following will decrease the Debt Equity Ratio?

a) Purchase of a fixed asset by taking a long term loan
b) Purchase of a fixed asset by issuing shares for consideration.
c) Sale of fixed assets (book value ₹ 10,0000) for ₹8,000.
d) Issue of debentures of ₹ 2,00,000 in the market

Ans – b)

What does a low proprietary ratio mean?

a) Adequate safety cover for lender and creditors
b) Greater risk to unsecured lenders and creditors
c) Shareholders funds are more than the total assets
d) None of these

Ans – b)

The current ratio of Vidur Pvt Ltd is 3:2. The accountant wants to maintain it at
2:1. following options are available.

i) He can repay Bills payable
ii) He can purchase goods on credit
iii) He can take short term loan

choose the correct option.

a) Only i) is correct
b) Only ii) is correct
c) Only i) and iii) are correct
d) All are correct

Ans – a)

Which of the following ratios is not a solvency ratio?

a) Debt to Equity ratio
b) Current Ratio
c) Total Assets to Debt Ratio
d) Proprietary Ratio

Ans – b)

The Liquidity ratio of concern is 1.5:1, and it purchased goods of ₹ 50,000
for cash, The ratio will:

a) increase
b) decrease
c) not change
d) may increase or decrease

Ans – b)

_______ of a business means the business is in a position to meet its short-term financial obligations as and when they become due.

a) Liquidity
b) Profitability
c) Solvency
d) All of these

Ans – a)

Which of the following transaction will decrease the Quick Ratio?

a) Debentures converted into equity shares
b) Paid rent in advance
c) Payment received from a debtor
d) All of these

Ans – b)

The interest coverage ratio is a :

a) Solvency Ratio
b) Activity Ratio
c) Profitability Ratio
d) Liquidity Ratio

Ans – a)

Current and Liquid ratios fall under the head of:

a) Solvency Ratio
b) Liquidity Ratio
c) Activity Ratio
d) Profitability Ratio

Ans – b)

Two basic measures of Long term Solvency are:

a) Inventory turnover ratio and a current ratio
b) Total asset to Debt ratio and Proprietory ratio
c) Gross Profit Ratio and Operating ratio
d) Current ratio and average collection period

Ans – b)

The Current Ratio is:

a) Liquid Assets/Current Assets
b) Fixed Assets/Current Assets
c) Current Assets/Current Liabilities
d) Liquid Assets/Current Liabilities

Ans – c)

Liquid Assets do not include:

a) Bills Receivable
b) Debtors
c) Inventory and Prepaid Expenses
d) Inventory

Ans – c)

Working Capital is the:

a) Cash and Bank Balance
b) Capital borrowed from Banks
c) Difference between current assets and current liabilities
d) Difference between current assets and Fixed Assets

Ans – c)

Working Capital is:

a) Current Assest + Non-current assets – Current liabilities
b) Capital Employed – Non-current assets
c) Fixed Assets – Current Liabilities
d) All current assets except inventory and prepaid expenses

Ans – b)

Current Assets is:

a) Working Capital + Current Liabilities
b) Quick Assets + Inventory + Prepaid Expenses
c) Total Assets – Non-current assets
d) All of the above

Ans – d)

Shareholders Funds or Equity is:

a) Total Assets – Total Debts – (Non Current Liabilities + Current
Liabilities)
b) Capital Employed – Long term debts
c) Equity and Preference Share Capital + Reserve and Surplus
d) All of the above

Ans – d)

On the basis of the following information: answer the question that follows:

Share capital ₹ 5,00,000, Reserve and surplus ₹ 1,20,000. Current Assets ₹ 1,80,000 and Non current Assets ₹ 7,20,000

The Proprietary ratio is:

a) 1.25:1
b) 0.68:1
c) 2:5
d) None of these

Ans – b)

Calculate Working Capital Turnover Ratio from the following information:

Revenue from operations ₹ 12,00,000
Current Assets ₹ 3,00,000
Total Assets ₹ 8,00,000
Non-Current Liabilities ₹ 3,00,000
Shareholders Funds ₹ 4,00,000

a) 6 times
b) 4 times
c) 2.5 times
d) None of these

Ans – a)

XYZ Ltd. earned a gross profit of ₹ 6,00,000 during the year and its gross profit ratio is 30%. Thus, its Revenue from Operations is:

a) ₹ 40,00,000
b) ₹ 20,00,000
c) ₹ 25,00,000
d) None of these

Ans – b)

Compute gross profit ratio; if revenue from operations is ₹ 3,25,000 and gross profit is 30% of the cost.

a) 23%
b) 32%
c) 27%
d) None of these

Ans – a)

From the following information, calculate Operating Ratio:

Cost of Revenue from Operations ₹ 4,00,000
Operating Expenses ₹ 55,000
Revenue from Operations ₹ 6,50,000

a) 55%
b) 70%
c) 65%
d) None of these

Ans – b)

From the following information, calculate Operating Rato:

Revenue from Operations ₹ 6,30,000
Rate of Gross Profit on Cost ₹ 40%
Selling Expenses ₹ 12,500
Administrative Expenses ₹ 10,000

a) 55%
b) 85%
c) 75%
d) None of these

Ans – c)

From the following information, Calcualte Return on Investment.

Net Profit after Interest and Tax ₹ 4,05,000
9% Debentures ₹ 15,00,000
Tax @10%
Capital Employed ₹ 3,00,000

a) 8%
b) 12%
c) 19.85%
d) 15%

Ans – c)

A company’s current ratio is 3:1 and liquid ratio is 1.8:1. If its current liabilities are ₹ 2,00,000, the value of inventory
is:

a) ₹ 2,40,000
b) ₹ 3,60,000
c) ₹ 1,20,000
d) None of these

Ans – a)

Ratio that are calculated for measuring the efficiency of operations of business based on effective utilisation of resources are known as:

(a) Liquidity Ratios
(b) Turnover Ratios
(c) Solvency Ratios
(d) Profitability Ratios

Ans – (b)

Inventory Turnover Ratio is:

(a) Average Inventory/Revenue from Operations
(b) Average Inventory/Cost of Revenue from Operations
(c) Cost of Revenue from Operations/Average Inventory
(d) G.P./Average Inventory

Ans – (c)

Opening Inventory ₹ 1,00,000; Closing Inventory ₹ 1,50,000; Purchases ₹ 6,00,000; Carriage ₹ 25,000; Wages ₹ 2,00,000. Inventory Turnover Ratios will be:

(a) 6.6 Times
(b) 7.4 Times
(c) 7 Times
(d) 6.2 Times

Ans – (d)

Revenue from Operations ₹ 8,00,000; Gross Profit Ratio 25%; Opening Inventory ₹ 1,00,000; Closing Inventory ₹ 60,000. Inventory Turnover Ratios will be:

(a) 10 Times
(b) 7.5 Times
(c) 8 Times
(d) 12.5 Times

Ans – (b)

On the basis of following data, the cost of revenue from operations by a company will be:

Opening Inventory ₹ 70,000; Closing Inventory ₹ 80,000; Inventory Turnover Ratio 6 Times.

(a) ₹ 1,50,000
(b) ₹ 90,000
(c) ₹ 4,50,000
(d) ₹ 4,80,000

Ans – (c)

Opening Inventory of a firm is ₹ 80,000. Cost of revenue from Operations is ₹ 6,00,000. Inventory Turnover Ratios is 5 Times. Its closing Inventory will be:

(a) ₹ 1,60,000
(b) ₹ 1,20,000
(c) ₹ 80,000
(d) ₹ 2,00,000

Ans – (a)

A company’s current ratio is 2.5:1 and liquid ratio is 3:2. If its current assets are ₹ 7,20,000, its inventory is:

a) ₹ 2,88,000
b) ₹ 4,80,000
c) ₹ 3,28,000
d) None of these

Ans – a)

If the average inventory is ₹ 1,00,000 and closing inventory is two times more than that in the begining, then the value the closing inventory:

a) ₹ 2,00,000
b) ₹ 1,50,000
c) ₹ 1,80,000
d) None of these

Ans – b)

Cost of revenue from operations ₹ 6,00,000; Inventory Turnover Ratio 5; Find out the value of opening inventory, if opening inventory is ₹ 8,000 less than the closing inventory.

(a) ₹ 1,12,000
(b) ₹ 1,16,000
(c) ₹ 1,28,000
(d) ₹ 1,24,000

Ans – (b)

Revenue from operations ₹ 2,00,000; Inventory Turnover Ratio 5; Gross Profit 25%. Find out the value of Closing Inventory, if Closing Inventory is ₹ 8,000 more than the Opening Inventory.

(a) ₹ 38,000
(b) ₹ 22,000
(c) ₹ 34,000
(d) ₹ 26,000

Ans – (c)

If average inventory is ₹ 50,000 and closing inventory is ₹ 2,000 less than the opening inventory, opening and closing inventory will be:

(a) ₹ 52,000 and ₹ 50,000
(b) ₹ 50,000 and ₹ 48,000
(c) ₹ 48,000 and ₹ 46,000
(d) ₹ 51,000 and ₹ 49,000

Ans – (d)

Average Inventory ₹ 60,000; Inventory Turnover Ratio 8; Gross Profit 20% on revenue from operations; What will be Gross Profit?

(a) ₹ 1,20,000
(b) ₹ 96,000
(c) ₹ 80,000
(d) ₹ 15,000

Ans – (a)

Opening Inventory ₹ 1,00,000; Closing Inventory ₹ 1,20,000; Purchases ₹ 20,00,000; Wages ₹ 2,40,000; Carriage Inwards ₹ 1,50,000; Selling Exp. ₹ 60,000; Revenue from Operations ₹ 30,00,000. Gross Profit Ratio will be:

(a) 29%
(b) 26%
(c) 19%
(d) 21%

Ans – (d)

Cash Revenue from Operations ₹ 4,00,000; Credit Revenue from Operations ₹ 21,00,000; Revenue from Operations Return ₹ 1,00,000; Cost of revenue from operations ₹ 19,20,000. G.P. ratio will be:

(a) 4%
(b) 23.2%
(c) 80%
(d) 20%

Ans – (d)

On the basis of following data, a Company’s Gross Profit Ratio will be: Net Profit ₹ 40,000; Office Expenses ₹ 20,000; Selling Expenses ₹ 36,000; Total Revenue from Operations ₹ 6,00,000.

(a) 16%
(b) 20%
(c) 6.67%
(d) 12.5%

Ans – (a)

What will be the amount of Gross Profit, if Revenue from Operations are ₹ 6,00,000 and Gross Profit Ratio is 20% of cost?

(a) ₹ 1,50,000
(b) ₹ 1,00,000
(c) ₹ 1,20,000
(d) ₹ 5,00,000

Ans – (b)

What will be the amount of Gross Profit. If Revenue from Operations are ₹ 6,00,000 and Gross Profit Ratio 20% of Revenue from Operations?

(a) ₹ 1,50,000
(b) ₹ 1,00,000
(c) ₹ 1,20,000
(d) ₹ 5,00,000

Ans – (c)

Opening Inventory ₹ 75,000; Closing Inventory ₹ 1,05,000; Inventory Turnover Ratio 6; Gross Profit 20% on cost; What will be Gross Profit?

(a) ₹ 1,35,000
(b) ₹ 1,08,000
(c) ₹ 90,000
(d) ₹ 18,000

Ans – (b)

A company’s revenue from opeartoins is ₹ 20,00,000, cost of revenue from operations is ₹ 14,00,000, closing inventories ₹ 50,000 and indirect expenses are ₹ 2,00,000. The amount of gross profit on the basis of given information is:

a) 40%
b) 25%
c) 30%
d) 35%

Ans – c)

Revenue from Operations is ₹ 1,80,000; Rate of Gross Profit is 25% on cost. What will be the Gross Profit?

(a) ₹ 45,000
(b) ₹ 36,000
(c) ₹ 40,000
(d) ₹ 60,000

Ans – (b)

Operating Ratio is:

(a) Cost of Revenue from Operations + Selling Expenses/Net Revenue from operations
(b) Cost of Production + Operating Expenses/Net Revenue from Operations
(c) Cost of Revenue from Operations + Operating Expenses/Net Revenue from Operations
(d) Cost of Production/Net Revenue from Operations

Ans – (c)

Cost of Revenue from Operations =

(a) Revenue from Operations – Net Profit
(b) Revenue from Operations – Gross Profit
(c) Revenue from Operations – Closing Inventory
(d) Purchases – Closing Inventory

Ans – (b)

Purchases ₹ 7,20,000; Office Expenses ₹ 30,000; Selling Expenses ₹ 90,000; Opening Inventory ₹ 1,40,000; Closing Inventory ₹ 80,000 Revenue from Operations ₹ 12,00,000. Calculate Operating Ratio.

(a) 60%
(b) 75%
(c) 70%
(d) 65%

Ans – (b)

Revenue from Operations ₹ 6,00,000; Gross Profit 20%; Office Expenses ₹ 30,000; Selling Expenses ₹ 48,000. Calculate Operating Ratio.

(a) 80%
(b) 85%
(c) 96.33%
(d) 93%

Ans – (d)

The Net Revenue from Operations of Gama Ltd. is ₹ 14,00,000. Its Gross Proift is ₹ 9,00,000;

Operating Expenses are ₹ 75,000;
Commission Received is ₹ 5,000;
Profit from Sale of Fixed Asset is ₹ 10,000.

The Operating Profit Ratio of Gama Ltd. will be:

(a) 59.29%
(b) 58.92%
(c) 60%
(d) 58.93%

Ans – (a)

Gross Profit Ratio of a company was 25%. Its credit revenue from operations was ₹ 16,00,000 and its cash revenue from operations was 20% of the total revenue from operations. If the indirect expenses of the company were ₹ 50,000, its net profit ratio will be:

(a) 27.5%
(b) 20%
(c) 22.5%
(d) 25%

Ans – (c)

The two basis measures of operational efficiency of a company are:

(a) Inventory Turnover Ration and Working Capital Turnover Ratio
(b) Liquid Ration and Operating Ratio
(c) Liquid Ration and Current Ratio
(d) Gross Profit Margin and Net Profit Margin

Ans – (a)

The area of interest for a long term lender while analyzing financial statements will be:

(a) Liquidity
(b) Activity
(c) Solvency
(d) Profitability

Ans – (c)

Net Profit ₹ 1,60,000; Wages ₹ 80,000; Office Expenses ₹ 30,000; Selling Expenses ₹ 10,000; Revenue from Operations ₹ 8,00,000. Gross Profit Ratio will be:

(a) 35%
(b) 25%
(c) 15%
(d) 5%

Ans – (b)

Purchase of a fixed asset by issuing debentures will _ the debt equity ratio (2:1).

a) Increase
b) Decrease
c) No change
d) May increase or decrease

Ans – a)

If capital employed is ₹ 8,00,000, total debt is ₹ 5,00,000, current liability is ₹ 2,00,000 then the value of debt equity ratio is:

a) 2:5
b) 3:5
c) 5:8
d) None of these

Ans – b)

What will be the amount of gross profit of a firm if its average inventory is ₹ 80,000, Inventory turnover ratio is 6 times, and the Selling price is 25% above cost?

(a) ₹ 1,20,000
(b) ₹ 1,60,000
(c) ₹ 2,00,000
(d) None of the above

Ans – (a)

Opening Inventory ₹ 40,000; Purchase ₹ 4,00,000; Purchase Return ₹ 12,000, What will be Inventory turnover ratio if Closing Inventory is less than Opening Inventory by ₹ 8,000?

(a) 9 Times
(b) 10.78 Times
(c) 11 Times
(d) 8.82 Times

Ans – (c)

Trade Receivables Turnover Ratio will be:

(a) 12 Times
(b) 8 Times
(c) 10.5 Times
(d) 7 Times

Ans – (d)

Total Revenue from Operations ₹ 12,00,000; Credit Revenue from Operations ₹ 9,00,000; Opening Debtors ₹ 90,000; Closing Debtors ₹ 1,10,000; Provision for Doubtful Debts ₹ 20,000. Trade Receivables Turnover Ratio will be:

(a) 10 Times
(b) 9 Times
(c) 12 Times
(d) 13.3 Times

Ans – (b)

Total Revenue from Operations ₹ 27,00,000; Credit Revenue from Operations ₹ 18,00,000; Opening Debtors ₹ 3,20,000; Closing Debtors ₹ 4,00,000; Provision for Doubtful Debts ₹ 60,000. Trade Receivables Turnover Ratio will be:

(a) 7.5 Times
(b) 9 Times
(c) 6 Times
(d) 5 Times

Ans – (d)

If Total Sales is ₹ 2,50,000 and Credit Sales is 25% of Cash Sales. The amount of Credit Sales is:

(a) ₹ 50,000
(b) ₹ 2,50,000
(c) ₹ 16,000
(d) ₹ 3,00,000

Ans – (a)

From the following particulars of Zee Ltd., the Trade Receivables Turnover Ratio of the company will be:

Options

(a) 3.75 times
(b) 4 times
(c) 4.17 times
(d) 8 times

Ans – (b)

Operating Profit Ratio will be:

(a) 20%
(b) 30%
(c) 24%
(d) 38%

Ans – (c)

If Net Revenue from Operations of a firm are ₹ 15,00,000, Gross Profit is ₹ 9,00,000, and Operating Expenses are ₹ 75,000. The operating profit ratio will be:

a) 45%
b) 50%
c) 55%
d) 65%

Ans – c)

The current assets and current liabilities of Accounts Guru Ltd are ₹ 3,00,000 and ₹ 2,00,000, respectively. The company is
Planning to avail a bank loan. The minimum current ratio required by bank is 2:1 to consider the loan proposed. The amount of
sundry creditors to be paid to achieve the desired level of current ratio will be:

a) ₹ 1,00,000
b) ₹ 2,00,000
c) ₹ 1,50,000
d) ₹ 3,00,000

Ans – a)

A firm makes Credit Revenue from Operations ₹ 2,40,000 during the year. If the Trade Receivables Turnover Ratio is 8 times, Calculate Closing Debtors, If the Closing Debtors are more by ₹ 6,000 than the Opening Debtors:

(a) ₹ 33,000
(b) ₹ 36,000
(c) ₹ 24,000
(d) ₹ 27,000

Ans – (a)

Credit Revenue from Operations ₹ 3,00,000. Trade Receivables Turnover Ratio 5; Calculate Closing Debtors, if Closing Debtors are two times in comparison to Opening Debtors.

(a) ₹ 40,000
(b) ₹ 60,000
(c) ₹ 80,000
(d) ₹ 1,20,000

Ans – (c)

Unilever Plc (ULVR.L) said on Thursday (Feb. 9, 2023): It would continue to raise prices for its detergents, soaps and packaged food to offset rising input costs, and ease up those hikes in the second half of 2023.

which one of the following is the reason for the decision taken by Unilever Pic?

(a) To repaid the company’s Debt to Equity Ratio so that it can derive the benefits of trading on equity.
(b) To repair the company’s Trade Receivables Ratio in order to reduce the risk of bad debts.
(c) To repair the company’s gross margin as the industry has been battling with COVID-era supply chain issues and raw material expenses
(d) To repair the company’s Inventory Turnover Ratio as the cost of warehousing had increased due to accumulation of stocks.

Ans – (c)

Choose the correct statement in the context of the Trade Payables Turnover Ratio.

(a) A high ratio indicates a shorter payment period
(b) A high ratio indicates a longer payment period
(c) A low ratio indicates a longer collection period
(d) A low ratio indicates a shorter collection period

Ans – (a)

Credit Purchases ₹ 6,00,000; Trade Payables Turnover Ratio 5; Calculate Closing Creditors, if Closing Creditors are ₹ 10,000 less than Opening Creditors.

(a) ₹ 1,15,000
(b) ₹ 1,25,000
(c) ₹ 1,30,000
(d) ₹ 1,10,000

Ans – (a)

On the basis of following data, the Working Capital Turnover Ratio of a company will be:

Liquid Assets ₹ 3,70,000; Inventory ₹ 80,000; Current Liabilities ₹ 1,50,000; Cost of revenue from Operations ₹ 7,50,000.

(a) 2.5 Times
(b) 3 Times
(c) 5 Times
(d) 3.8 Times

Ans – (a)

Bhumi Ltd. has current ratio of 4 : 1 and quick ratio of 2.5:1. Assuming inventories (stock) are ₹ 22,500. The amount of total current assets will be:

a) ₹ 60,000
b) ₹ 45,000
c) ₹ 80,000
d) ₹ 54,200

Ans – a)

A firm has current ratio of 4:1 and quick ratio of 2.5:1. Assuming inventories (stock) are ₹ 22,500, Total amount of current liabilities
will be:

a) ₹ 20,000
b) ₹ 16,000
c) ₹ 15,000
d) ₹ 30,000

Ans – c)

If Jyoti Ltd. has a liquid ratio of 7:3 and its stock is ₹ 25,000 and current liabilities are ₹ 75,000. The amount of liquid
assets will be:

a) ₹ 1,75,000
b) ₹ 2,00,000
c) ₹ 2,25,000
d) ₹ 5,000

Ans – a)

If X Ltd. has a liquid ratio of 7:3 and its stock is ₹ 25,000 and current liabilities are ₹ 75,000. The amount of the current
assets will be:

a) ₹ 1,25,200
b) ₹ 54,000
c) ₹ 2,00,000
d) ₹ 65,200

Ans – c)

If PQR Ltd. has a liquid ratio of 7:3 and its stock is ₹25,000 and current liabilities are ₹ 75,000, the current ratio will
be:

a) 2.67:1
b) 2.35:1
c) 4:1
d) 2.36:1

Ans – a)

Sheetal Ltd. has a current ratio of 3:1. It its stock is ₹40,000 and total current liabilities are ₹ 75,000, the quick ratio will
be:

a) 2.7:1
b) 2.47:1
c) 4:1
d) 2.36:1

Ans – b)

Shalini Ltd. has a current ratio of 3:1. It its stock is ₹ 40,000 and total current liabilities are ₹ 75,000, the amount
of current assets of Shalini Ltd will be:

a) ₹ 75,000
b) ₹ 2,25,000
c) ₹ 2,50,000
d) ₹ 98,500

Ans – b)

Aakash Ltd has a current ratio of 3:1. It its stock is ₹ 40,000 and total current liabilities are ₹ 75,000, the amount
of liquied assets of Aakash Ltd will be:

a) ₹ 1,85,000
b) ₹ 2,25,000
c) ₹ 2,50,000
d) ₹ 98,500

Ans – a)

Current Assets of a company are ₹ 5,00,000 and its current ratio is 2.5. Thereafter, it received ₹ 2,00,000 from its debtors and made payment of ₹ 1,00,000 to its creditors. Current ratio will be:

(a) 2 : 1
(b) 5 : 1
(c) 6 : 1
(d) 4 : 1

Ans – (d)

If Current assets of a company are ₹ 5,00,000; current ratio 2.5:1 and Quick Ratio 1:1. The value of current liabilities
will be:

a) ₹ 1,20,000
b) ₹ 2,10,000
c) ₹ 2,00,000
d) ₹ 1,50,000

Ans – c)

If Current assets of a company are ₹ 5,00,000; current ratio 2.5:1 and Quick Ratio 1:1, the value of liquid assets will be:

a) ₹ 1,20,000
b) ₹ 2,10,000
c) ₹ 2,00,000
d) ₹ 1,50,000

Ans – c)

If Current assets of a company are ₹ 5,00,000; current ratio 2.5:1 and Quick Ratio 1:1, the value of inventory will be:

a) ₹ 1,20,000
b) ₹ 2,10,000
c) ₹ 3,00,000
d) ₹ 1,50,000

Ans – c)

Current liabilities of a company are ₹ 1,20,000. Its current ratio is 3.00 and liquid ratio is 0.90. The amount of Current
Asset will be:

a) ₹ 1,20,000
b) ₹ 2,10,000
c) ₹ 3,60,000
d) ₹ 1,50,000

Ans – c)

Current liabilities of a company are ₹ 1,20,000. Its current ratio is 3.00 and liquid ratio is 0.90. The amount of Liquid
Assets will be?

a) ₹ 1,20,000
b) ₹ 2,10,000
c) ₹ 3,60,000
d) ₹ 1,08,000

Ans – d)

Current liabilities of a company are ₹ 1,20,000. Its current ratio is 3.00 an liquid ratio is 0.90. The amount of Inventory
will be:

a) ₹ 1,20,000
b) ₹ 2,10,000
c) ₹ 2,52,000
d) ₹ 1,50,000

Ans – c)

Current ratio of a company is 3:1, working capital is ₹ 30,000. The amount of current assets and current liabilities is:

a) 12,000; 24,000
b) 21,000; 45,000
c) 45,000; 15,000
d) 50,000; 65,000

Ans – c)

Which of the following are included in traditional classification of ratios?

(i) Liquidity Ratios
(ii) Statement of Profit and Loss Ratios
(iii) Balance Sheet Ratios
(iv) Profitability Ratios
(v) Composite Ratios
(vi) Solvency Ratios

(a) (ii), (iii) and (v)
(b) (i), (iv) and (vi)
(c) (i), (ii) and (vi)
(d) All (i), (ii), (iii), (iv), (v), (vi)

Ans – (a)

Which one of the following is correct?

(i) A ratio is an arithmetical relationship of one number to another number
(ii) Liquid Ratio is also known as Acid Test Ratio
(iii) Ideally accepted Current Ratio is 1 : 1
(iv) Debt-Equity Ratio is the relationship between Outsider’s Funds and Shareholders’ Funds

In the context of the above statements, which of the following options in correct?

(a) All (i), (ii) (iii) and (iv) are correct
(b) Only (i), (ii) and (iv) are correct
(c) Only (ii), (iii) and (iv) are correct
(d) Only (ii) and (iv) are correct

Ans – (b)

From the following calculate Interest Coverage Ratio

Net profit after tax ₹ 12,00,000; 10% Debentures ₹ 1,00,00,000; Tax Rate 40%.

(a) 1.2 times
(b) 3 times
(c) 2 times
(d) 5 times

Ans – (b)

________ is included in current assets while preparing balance sheet as per revised Schedule III but excluded from current assets while calculating Current Ratio.

(a) Debtors
(b) Cash and Cash Equivalents
(c) Loose tools and Stores and Spares
(d) Prepaid Expenses

Ans – (c)

Debt-Equity Ratio of Dhamaka Ltd is 3 : 1. Which of the following will result in decrease in this ratio?

(a) Issue of Debentures for Cash of ₹ 2,00,000
(b) Issue of Debentures of ₹ 3,00,000 to Vendors from whom Machinery was Purchased
(c) Goods purchased on Credit of ₹ 1,00,000
(d) Issue of Equity Shares of ₹ 2,00,000

Ans – (d)

Vibgyor Ltd. has current assets worth ₹ 3,50,000 and it needs to pay off its obligations worth ₹ 2,00,000. If the firm has to make a payment of a current liability worth ₹ 50,000, What will be the current ratio:

(a) 3 : 1
(b) 0.75 : 1
(c) 1 : 1
(d) 2 : 1

Ans – (d)

Current ratio calculated on the basis of above information will be:

(a) 0.5 : 1
(b) 2 : 1
(c) 1.5 : 1
(d) 1 : 1

Ans – (b)