Commerce Exam  >  Commerce Notes  >  Crash Course of Accountancy - Class 12  >  Sample Questions - Ratio Analysis

Sample Questions - Ratio Analysis | Crash Course of Accountancy - Class 12 - Commerce PDF Download

                                                       Ratio Analysis

Time – 50 mins

M.M. - 30

Q1. The current ratio of the company is 2.5:1. State giving reasons whether declaration of dividend will improve, reduce or not change the ratio. (1 mark)

Q2. If operating ratio of a company is 24% what is the operating profit ratio of the company? (1 mark)

Q3. Find debt equity and proprietary ratio and also comment upon the financial position of the business:
Total assets                    Rs.50,000
Total debt                       Rs. 20,000
Equity                              Rs. 10,000.
(3 marks)

Q4. What will be the impact of the following transactions on debt equity ratio- 8:1
Sale of fixed assets at a profit
Declaration of dividend
Payment of dividend for dividend already declared. (3 marks)

Q5.
(a) X Ltd. has a current ratio of 3.5:1 and quick ratio of 2:1. If excess of current assets over quick assets represented by Inventory is Rs. 24,000, calculate current assets and current liabilities.
(b) From the following information, calculate Inventory Turnover Ratio.

Revenue from Operations: Rs. 4,00,000, Average Inventory: Rs. 55,000, The rate of Gross Loss on Revenue from Operations was 10%. (4 marks)

Q6. Net profit after Interest taxes is Rs. 2,80,000,15% long term debt Rs. 8,00,000. 10% preference Share capital Rs. 4,80,000, Tax rate 30% Calculate return on capital employed and interest coverage ratio. (4 marks)

Q7. A company’s Stock Turnover is 5 times. Stock at the end is Rs. 20,000 more than that at the beginning. Revenue from operations are Rs. 8,00,000. Rate of Gross Profit on cost 1/4; Current Liabilities Rs. 2,40,000. Acid Test Ratio 0.75. Calculate Current Ratio. (4 marks)

Q8. From the following information, calculate the following ratios:
(i) Acid Test Ratio
(ii) Debt Equity Ratio
(iii) Working Capital Turnover Ratio
(iv) operating ratio Information: Net RFO Rs. 3,00,000; Gross Profit Rs. 1,00,000; Total Current Assets Rs. 2,00,000; Closing Inventory Rs. 20,000; Prepaid Insurance Rs. 4,000; Total Current Liabilities Rs. 1,20,000; Share Capital Rs. 3,50,000; Reserve & Surplus Rs. 40,000; Preliminary Expenses Rs. 7,000; Fixed Assets Rs. 4,30,000, selling and distribution expenses Rs. 4,000 & office and administrative expenses Rs. 6,000. (4 marks)

Q9. Current ratio- 2, Quick ratio- 1.5, Working capital- Rs. 3,00,000 Closing stock is 3 times more than the opening stock, Average age of inventory 73 days, Gross profit is 10% of revenue from operations, Cash revenue from operations is ¼ of credit revenue from operations, Average debtors- Rs. 50000.Find Closing stock, cost of revenue from operations and debtors velocity. (6 marks)

The document Sample Questions - Ratio Analysis | Crash Course of Accountancy - Class 12 - Commerce is a part of the Commerce Course Crash Course of Accountancy - Class 12.
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FAQs on Sample Questions - Ratio Analysis - Crash Course of Accountancy - Class 12 - Commerce

1. What is ratio analysis in commerce?
Ratio analysis in commerce is a financial analysis technique used to evaluate the performance and financial health of a company. It involves comparing different financial ratios, such as liquidity ratios, profitability ratios, and activity ratios, to assess the company's financial position and make informed decisions.
2. How is liquidity ratio calculated in ratio analysis?
Liquidity ratio is calculated by dividing a company's current assets by its current liabilities. The most commonly used liquidity ratios are the current ratio and the quick ratio. The current ratio measures a company's ability to pay its short-term obligations, while the quick ratio provides a more stringent measure by excluding inventory from the calculation.
3. What are profitability ratios in ratio analysis?
Profitability ratios in ratio analysis measure a company's ability to generate profits in relation to its sales, assets, and equity. Common profitability ratios include gross profit margin, net profit margin, return on assets (ROA), and return on equity (ROE). These ratios help investors and analysts assess a company's profitability and its ability to generate returns for its shareholders.
4. How can ratio analysis help in decision making?
Ratio analysis helps in decision making by providing valuable insights into a company's financial performance and position. By analyzing different ratios, such as liquidity ratios, profitability ratios, and activity ratios, decision-makers can assess the company's strengths, weaknesses, and areas for improvement. This information can guide decisions related to investments, financial planning, and operational strategies.
5. What are the limitations of ratio analysis?
Ratio analysis has certain limitations that should be considered. Firstly, ratios are based on historical financial data and may not accurately reflect future performance. Secondly, ratios can be influenced by accounting policies and practices, making comparisons between companies difficult. Additionally, ratios do not consider external factors such as industry trends and economic conditions. It is important to use ratio analysis in conjunction with other financial analysis tools for a comprehensive assessment of a company's financial health.
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