CBSE Class 12 Accountancy Accounting Ratios MCQs Set C

Question: Gross profit is equal to

a) Gross Profit/Net Sales x100

b) Gross Profit+Net Sales x100

c) Gross Profit-Net Sales x100

d) None of the options

Answer: Gross Profit/Net Sales x100

Question: Gross profit would be the difference between

a) Net sales and cost of goods sold

b) Gross sales and cost of goods sold

c) Net sales and cost of goods sold and Gross sales and cost of goods sold

d) None of the options

Answer: Net sales and cost of goods sold

Question: Gross Profit ratio expresses the relationship between

a) Gross profit and sales

b) Net Profit and sales

c) has no effect on current ratio

d) None of the options

Answer: Gross profit and sales

Question: For calculating Security of Return on Debt we calculate

a) Interest Coverage Ratio

b) Debt-Equity Ratio

c) Proprietary Ratio

d) Fixed Assets and Proprietary Fund Ratio

Answer: Interest Coverage Ratio

Question: For calculating the security of debt we calculate

a) All of the options

b) Debt-Equity Ratio

c) Proprietary Ratio

d) Fixed Assets and Proprietary Fund Ratio

Answer: All of the options

Question: Solvency of a concern can be measured in

a) Security of Debt and Security of return

b) Security of Debt

c) Security of return

d) None of the options

Answer: Security of Debt and Security of return

Question: Ratios which throw light on the debt servicing ability of the businesses in the long run are known as

a) Solvency ratios

b) Proprietary Ratio

c) Quick Ratios

d) None of the options

Answer: Solvency ratios

Question: The solvency position of any firm is determined and measured with the help of

a) Solvency ratios

b) Activity Ratios

c) Profitability Ratios

d) None of the options

Answer: Solvency ratios

Question: A very high current ratio is

a) Not a good sign

b) A good sign

c) Not a good sign and A good sign

d) None of the options

Answer: Not a good sign

Question: Quick assets are those assets which can get converted into

a) Cash easily

b) Liability easily

c) Cash easily and Liability easily

d) None of the options

Answer: Cash easily 

Question: Which ways to measure the liquidity of a firm

a) Current ratio of the firm and Quick ratio of the firm

b) Current ratio of the firm

c) Quick ratio of the firm

d) None of the options

Answer: Current ratio of the firm and Quick ratio of the firm

Question: Management Members are interested in calculating

a) Activity Ratios and Profitability Ratios

b) Activity Ratios

c) Profitability Ratios

d) None of the options

Answer: Activity Ratios and Profitability Ratios

Question: Long term creditors are interested in calculating

a) All of the options

b) Debt-Equity Ratio

c) Proprietary Ratio

d) Total Assets to Debt Ratio

Answer: All of the options

Question: Financial ratio analysis are conducted by which groups of analysts

a) All of the options

b) Managers

c) Equity investors

d) Long term creditors

Answer: All of the options

Question: Operating expenses normally include

a) Administrative and office expenses and Selling and distribution expenses

b) Administrative and office expenses

c) Selling and distribution expenses

d) None of the options

Answer: Administrative and office expenses and Selling and distribution expenses

Question: The two basic components for the calculation of operating ratio are

a) Operating cost (cost of goods sold plus operating expenses) and net sales

b) Operating cost (cost of goods sold plus operating expenses) and Gross sales

c) Operating cost (cost of goods sold plus operating expenses) and Net Loss

d) None of the options

Answer: Operating cost (cost of goods sold plus operating expenses) and net sales

Question: Operating ratio is the ratio of

a) Cost of goods sold plus operating expenses to net sales

b) Cost of goods sold minus operating expenses to net sales

c) Cost of goods sold plus operating expenses to net sales and Cost of goods sold minus operating expenses to net sales

d) None of the options

Answer: Cost of goods sold plus operating expenses to net sales

Question: Operating Profit Ratio is equal to

a) Operating Profit Ratio/Net sales X 100

b) Gross Profit/Net sales/100

c) Net Profit/Net sales/100

d) None of the options

Answer: Operating Profit Ratio/Net sales X 100

Question: Net profit ratio is equal to

a) Net Profit/Net sales/100

b) Net Profit+Net sales/100

c) Gross Profit/Net sales/100

d) None of the options

Answer: Net Profit/Net sales/100

Question: Net sales is equal to

a) Sales-Sales Return

b) Sales+Sales Return

c) Sales/Sales Return

d) None of the options

Answer: Sales-Sales Return

Question: Suppliers and creditors of a firm are interested in

a) Liquidity position

b) Profitability position

c) Market share position

d) Debt position

Answer: Liquidity position

Question: Which ratio explains that how much por tion of earning is distributed in the form of dividend?

a) Pay-out Ratio

b) Equity-Debt Ratio

c) Earning Yield Ratio

d) Dividend-Debt Ratio

Answer: Pay-out Ratio

Question: The basic components for the calculation of gross profit ratio are

a) Gross profit and net sales

b) Assets and liabilities

c) Gross profit and net sales and Assets and liabilities

d) None of the options

Answer: Gross profit and net sales

Question: Those assets which can get converted into cash easily in case of emergency

a) Quick assets

b) Intangible Assets

c) Quick assets and Intangible Assets

d) None of the options

Answer: Quick assets

Question: Which ratio indicates the long-term or future solvency position of the business

a) Equity ratio

b) Net Profit Ratio

c) Gross Profit Ratio

d) None of the options

Answer: Equity ratio

Question: Long term solvency of any business we calculate which ratios

a) All of the options

b) Debt Equity

c) Proprietary Ratio

d) Proprietary Ratio

Answer: All of the options

Question: Inventory turnover ratio is more important in case of

a) Grocery store

b) Insurance company

c) Grocery store and Insurance company

d) None of the options

Answer: Grocery store

Question: If current assets are quite capable to pay the current liability the liquidity of the concerned firm will be considered

a) Good

b) Bad

c) Average

d) None of the options

Answer: Good

Question: The current ratio explains the relationship between

a) Current assets and current liabilities

b) Sundry Debtors and sundry creditors

c) Current assets and current liabilities and Sundry Debtors and sundry creditors

d) None of the options

Answer: Current assets and current liabilities

Question: Which one is considered the more refined form of measuring the liquidity of the firm

a) Quick ratio of the firm

b) Current ratio of the firm

c) Quick ratio of the firm and Current ratio of the firm

d) None of the options

Answer: Quick ratio of the firm

Question: Current Assets Rs.5,00,000; Current Liabilities Rs. 1,00,000; Revenue from Operations Rs.28,00,000. Working Capital turnover Ratio will be:

a) 7 times

b) 5.6 times

c) 8 times

d) 10 times

Answer: A

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

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

a) 2.5 Times

b) 3 Times

c) 5 Times

d) 3.8 Times

Answer: A

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

a) 3 Times

b) 5 Times

c) 8 Times

d) 4 Times

Answer: B

Question: 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

Answer: B

Question: 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

Answer: A

Question: Assuming liquid ratio of 1.2 : 1, cash collected from debtors would :

a) increase liquid ratio

b) decrease liquid ratio

c) have no effect on liquid ratio

d) increase gross profit ratio

Answer: C

Question: If the inventory turnover ratio is divided into 365, it becomes a measure of ______

a) Sales efficiency

b) Average Age of Inventory

c) Sales Turnover

d) Average Collection Period

Answer: B

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

a) Rs.52,000 and Rs.50,000

b) Rs.50,000 and Rs.48,000

c) Rs.48,000 and Rs.46,000

d) Rs.51,000 and Rs.49,000

Answer: D

Question: Opening Inventory Rs.50,000; Closing Inventory Rs.40,000 and cost of revenue from operations Rs.7,20,000. What will be Inventory Turnover Ratio?

a) 18 Times

b) 16 Times

c) 14.4 Times

d) 8 Times

Answer: B

Question: If opening inventory is Rs. 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.

Answer: B

Question: A transaction involving a 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;

Answer: D

Question: A transaction involving decrease in Current Ratio and an increase 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

Answer: C

Question: 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

Answer: D

Question: Cash Balance Rs.15,000; Trade Receivables Rs.35,000; Inventory Rs.40,000; Trade Payables Rs.24,000 and Bank Overdraft is Rs.6,000. Current Ratio will be :

a) 3.75 : 1

b) 3 : 1

c) 1 : 3

d) 1 : 3.75

Answer: B

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

a) 1 : 2

b) 2 : 1

c) 2.33 : 1

d) 2.5 : 1

Answer: D

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

a) 3.6 : 1

b) 2.1 : 1

c) 2 : 1

d) 2.05 : 1

Answer: C

Question: A Company’s Current Ratio is 3 : 1; Current Liabilities are Rs.2,50,000; Inventory is Rs.60,000 and Prepaid Expenses are Rs. 5,000. Its Liquid Assets will be :

a) Rs.6,90,000

b) Rs.6,95,000

c) Rs.6,85,000

d) Rs.8,15,000

Answer: C

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

a) .4:1

b) .32 : 1

c) .72 : 1

d) .5 : 1

Answer: A

Question: 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

Answer: C

Question: On the basis of following data, the proprietary ratio of a Company will be : Equity Share Capital Rs.6,00,000; Debentures Rs.2,40,000; Statement of Profit & Loss Debit Balance Rs.40,000.

a) 74%

b) 65%

c) 82%

d) 70%

Answer: D

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

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

a) 70%

b) 80%

c) 85%

d) 90%

Answer: C

Question: The formula for calculating the Trade Receivables Turnover Ratio is :

a) Total Revenue from Operations/Average

b) Debtors Credit Revenue from Operations/Average Debtors

c) Net Credit Revenue from Operations/Average Debtors + Average Bills Receivable

d) None of the Above

Answer: C

Question: Total revenue from operations Rs.9,00,000; Cash revenue from operations Rs.3,00,000; Debtors Rs.1,00,000; B/R Rs.20,000. Trade Receivables Turnover Ratio will be :

a) 5 Times

b) 6 Times

c) 7.5 Times

d) 9 Times

Answer: A

Question: Credit Purchases Rs.9,60,000; Cash Purchases Rs.6,40,000; Creditors Rs.2,40,000; Bills Payable Rs.80,000. Average Payment Period will be :

a) 3 months

b) 4 months

c) 2.4 months

d) 6 months

Answer: B

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

Net Profit Rs.40,000; Office Expenses Rs.20,000; Selling Expenses Rs.36,000; Total revenue from operations Rs.6,00,000.

a) 16%

b) 20%

c) 6.67%

d) 12.5%

Answer: A

Question: What will be the amount of Gross Profit, if revenue from operations are Rs.6,00,000 and Gross Profit Ratio is 20% of cost?

a) Rs. 1,50,000

b) Rs. 1,00,000

c) Rs. 1,20,000

d) Rs.5,00,000

Answer: B