Accounting Ratios

Question 1.
The formula for ascertaining Total Assets to Debt Ratio is:

Answer
Answer: (a)

Question 2.
Proprietory Ratio indicates the relationship between proprietor’s funds and….
(a) Reserve
(b) Share Capital
(c) Total Assets
(d) Debentures

Answer
Answer: (c) Total Assets

Question 3.
Proprietory ratio is calculated by the following formula:

Answer
Answer: (c)
Question 4.
Which one of the following ratios is most important in determining the long-term
solvency of a company ?
(a) Profitability Ratio
(b) Debt-Equity Ratio
(c) Stock Turnover Ratio
(d) Current Ratio

Answer
Answer: (b) Debt-Equity Ratio

Question 5.
Total Assets ₹ 8,10,000
Total Liabilities ₹ 2,60,000
Current Liabilities ₹ 40,000
Debt-equity ratio is:
(a) 0.05 : 1
(b) 0.4 : 1
(c) 2.5 : 1
(d) 4 : 1

Answer
Answer: (c) 2.5 : 1

Question 6.
Equity share capital ₹ 15,00,000
Reserve and Surplus ₹ 7,50,000
Total Assets ₹ 45,00,000
Properletory Ratio ?
(a) 50%
(b) 33.3%
(c) 200%
(d) 60%

Answer
Answer: (a) 50%

Question 7.
Total Assets ₹ 7,70,000
Total Liabilities ₹ 2,60,000
Current Liabilities ₹ 40,000
Total Assets to Debt Ratio is:
(a) 3.5 : 1
(b) 2.56 : 1
(c) 2.8 : 1
(d) 3 : 1

Answer
Answer: (a) 3.5 : 1

Question 8.
Profitability Ratios are generally expressed in :
(a) Simple Ratio
(b) Percentage
(c) Times
(d) None of these

Answer
Answer: (b) Percentage

Question 9.
The ratios are primarily measures of earning capacity of the business.
(a) Liquidity
(b) Activity
(c) Debt
(d) Profitability

Answer
Answer: (d) Profitability
Question 10.
The gross profit ratio is the ratio of gross profit to :
(a) Net Cash Sales
(b) Net Credit Sales
(c) Closing Stock
(d) Net Total Sales

Answer
Answer: (d) Net Total Sales

Question 11.
Operating Ratio is:
(a) Profitability Ratio
(b) Activity Ratio
(c) Solvency Ratio
(d) None of these

Answer
Answer: (a) Profitability Ratio

Question 12.
Which of the following is an operating’ income ?
(a) Sale of Merchandise
(b) Interest Income
(c) Dividend Income
(d) Profit on the sale of old car

Answer
Answer: (a) Sale of Merchandise
Question 13.
Which of the following non-operating expense?
(a) Rent
(b) Selling Expenses
(c) Wages
(d) Loss on Sale of Machinery

Answer
Answer: (d) Loss on Sale of Machinery

Question 14.
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

Answer
Answer: (d) Activity, debt and profitability

Question 15.
To know the return on investment, by capital employed we mean:
(a) Net Fixed Assets
(b) Current Asset-Current Liabilities
(c) Gross Block
(d) Fixed Assets + Current Assets-Current Liabilities

Answer
Answer: (d) Fixed Assets + Current Assets-Current Liabilities

Question 16.
The term fixed assets include :
(a) Cash
(b) Machinery
(c) Debtors
(d) Prepaid Expenses

Answer
Answer: (b) Machinery

Question 17.
Ratio based on figures of profit & loss as well a the Balance sheet are:
(a) Profitability Ratios
(b) Operation Ratio
(c) Liquidity Ratio
(d) Composite Ratio

Answer
Answer: (d) Composite Ratio

Question 18.
Debtors Turnover Ratio :

Answer
Answer: (c)
Question 19.
When opening stock is ₹ 50,000 closing stock ₹ 60,000 and cost of goods sold is ₹
2,20,000, then stock turn over ratio is:
(a) 2 times
(b) 3 times
(c) 4 times
(d) 5 times

Answer
Answer: (a) 2 times

Question 20.
What does Creditors Turnover Ratio take into account:
(a) Total credit purchases
(b) Total credit sales
(c) Total cash sales
(d) Total cash purchases

Answer
Answer: (a) Total credit purchases

Question 21.
Cost of goods sold :
(a) Sales – Net profit
(b) Sales – Gross profit
(c) Purchases – Opening Stock
(d) None of the above

Answer
Answer: (b) Sales – Gross profit

Question 22.
The ideal liquid ratio is :
(a) 2 : 1
(b) 1 : 1
(c) 5 : 1
(d) 4 : 1

Answer
Answer: (b) 1 : 1

Question 23.
The ideal current ratio is :
(a) 2 : 1
(b) 1 : 2
(c) 3 : 2
(d) 3 : 4

Answer
Answer: (a) 2 : 1

Question 24.
Operating Ratio is:
(a) Profitability Ratio
(b) Activity Ratio
(c) Solvency Ratio
(d) None of these

Answer
Answer: (a) Profitability Ratio

Question 25.
Profitability Ratio is generally shown in :
(a) Simple Ratio
(b) Percentage
(c) Times
(d) None of these

Answer
Answer: (b) Percentage

Question 26.
If sales is 7 4,20,000 sales returns is 7 20,000 and cost of goods sold 7 3,20,000
gross profit ratio will be :
(a) 20%
(b) 25%
(c) 15%
(d) 10%

Answer
Answer: (a) 20%

Question 27.
Stock turnover ratio comes under :
(a) Liquidity Ratio
(b) Profitability Ratio
(c) Activity Ratio
(d) None of these

Answer
Answer: (c) Activity Ratio

Question 28.
The satisfactory ratio between internal and external equity is. :
(a) 1 : 2
(b) 2 : 1
(c) 3 : 1
(d) 4 : 1

Answer
Answer: (b) 2 : 1
Question 29.
Current Ratio includes:
(a) Stock
(b) Debtors
(c) Cash
(d) All of these

Answer
Answer: (c) Cash

Question 30.
Current Ratio =
(a) Current Assets/Current Liabilities
(b) Liquid Assets/Current Liabilities
(c) Liquid Assets/Current Assets
(d) Fixed Assets/Current Assets

Answer
Answer: (a) Current Assets/Current Liabilities

Question 31.
Liquid Assets include :
(a) Bills Receivable
(b) Debtors
(c) Cash Balance
(d) All of these

Answer
Answer: (d) All of these
Question 32.
Which of the following assets is not taken into consideration in calculating acid-test
ratio ?
(a) Cash
(b) Bills Receivable
(c) Stock
(d) None of these

Answer
Answer: (c) Stock

Question 33.
When Cash is 7 10,000 Stock is 7 25,000, B/R is 7 5,000 Creditors is 7 22,000 and
Bank Overdraft is 7 8,000 then current ratio is :
(a) 2 : 1
(b) 4 : 3
(c) 3 : 4
(d) 1 : 2

Answer
Answer: (b) 4 : 3

Question 34.
The two basic measures of liquidity are :
(a) Inventory Turnover and Current Ratio
(b) Current Ratio and Liquid Ratio
(c) Current Ratio and Average Collection Period
(d) Current Ratio and Debtors Turnover Ratio

Answer
Answer: (b) Current Ratio and Liquid Ratio
Question 35.
Liquidity Ratio:

Answer
Answer: (c)

Question 36.
The term ‘Current Liabilities’ does not include: .
(a) Sundry Creditors
(b) Debentures
(c) Bills Payable
(d) Outstanding Expenses

Answer
Answer: (b) Debentures

Question 37.
The term‘Current Assets’include
(a) Long-term Investment
(b) Short-term Investment
(c) Furniture
(d) Preliminary Expenses

Answer
Answer: (b) Short-term Investment
Question 38.
Liquid Ratio is also known as:
(a) Current Ratio
(b) Quick Ratio
(c) Capital Ratio
(d) None of these

Answer
Answer: (b) Quick Ratio

Question 39.
To test the liquidity of a concern which of the following ratios is useful ?
(a) Capital Turnover Ratio
(b) Acid Test Ratio
(c) Stock Turnover Ratio
(d) Net Profit Ratio

Answer
Answer: (b) Acid Test Ratio

Question 40.
Which of the following transactions will improve the current ratio ?
(a) Purchase of good for cash
(b) Cash received from customers
(c) Payment of creditors
(d) Credit purchase of goods

Answer
Answer: (c) Payment of creditors

Question 41.
Debt-equity ratio is :
(a) Liquidity Ratio
(b) Activity Ratio
(c) Solvency Ratio
(d) Operating Ratio

Answer
Answer: (c) Solvency Ratio

Question 42.
The formula for finding out Debt-Equity Ratio is:
(a) Long-term Debts/Shareholders’ Funds
(b) Debentures/Equity Capital
(c) Net Profit/Total Capital
(d) None of these

Answer
Answer: (a) Long-term Debts/Shareholders’ Funds