# PPT - Accounting Ratios Notes | Study Accountancy Class 12 - Commerce

## Commerce: PPT - Accounting Ratios Notes | Study Accountancy Class 12 - Commerce

The document PPT - Accounting Ratios Notes | Study Accountancy Class 12 - Commerce is a part of the Commerce Course Accountancy Class 12.
All you need of Commerce at this link: Commerce
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RATIO ANALYSIS
Page 2

RATIO ANALYSIS
RATIO ANALYSIS
Ratio analysis is the process of determining and
interpreting numerical relationship based on
financial statements.
It is the technique of interpretation of financial
statements with the help of accounting ratios
derived from the balance sheet and profit and loss
account.
Page 3

RATIO ANALYSIS
RATIO ANALYSIS
Ratio analysis is the process of determining and
interpreting numerical relationship based on
financial statements.
It is the technique of interpretation of financial
statements with the help of accounting ratios
derived from the balance sheet and profit and loss
account.
Classification Of Ratios
•
Analysis of Short Term Financial Position or
Test of Liquidity.
•
Analysis of Long Term Financial Position or Test
of Solvency.
•
Activity Ratios.
•
Profitability Ratios.
Page 4

RATIO ANALYSIS
RATIO ANALYSIS
Ratio analysis is the process of determining and
interpreting numerical relationship based on
financial statements.
It is the technique of interpretation of financial
statements with the help of accounting ratios
derived from the balance sheet and profit and loss
account.
Classification Of Ratios
•
Analysis of Short Term Financial Position or
Test of Liquidity.
•
Analysis of Long Term Financial Position or Test
of Solvency.
•
Activity Ratios.
•
Profitability Ratios.
I. Test Of Liquidity
•
The liquidity ratios are used to test the short term
solvency or liquidity position of the business.
•
It enables to know whether short term liabilities can
be paid out of short term assets.
•
It is a valuable aid to management in checking the
efficiency with which working capital is being
employed.
•
It is also of importance to shareholders and long term
creditors in determining to some extent the prospects
of dividend and interest payment.
Page 5

RATIO ANALYSIS
RATIO ANALYSIS
Ratio analysis is the process of determining and
interpreting numerical relationship based on
financial statements.
It is the technique of interpretation of financial
statements with the help of accounting ratios
derived from the balance sheet and profit and loss
account.
Classification Of Ratios
•
Analysis of Short Term Financial Position or
Test of Liquidity.
•
Analysis of Long Term Financial Position or Test
of Solvency.
•
Activity Ratios.
•
Profitability Ratios.
I. Test Of Liquidity
•
The liquidity ratios are used to test the short term
solvency or liquidity position of the business.
•
It enables to know whether short term liabilities can
be paid out of short term assets.
•
It is a valuable aid to management in checking the
efficiency with which working capital is being
employed.
•
It is also of importance to shareholders and long term
creditors in determining to some extent the prospects
of dividend and interest payment.
Important Ratios In Test Of Liquidity
•
Current ratio.
•
Quick ratio.
•
Absolute liquid ratio.
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