{"id":21572,"date":"2021-04-14T18:10:59","date_gmt":"2021-04-14T12:40:59","guid":{"rendered":"https:\/\/ncertsolutions.guru\/?p=21572"},"modified":"2021-04-14T18:12:40","modified_gmt":"2021-04-14T12:42:40","slug":"ncert-solutions-for-class-12-accountancy-chapter-10","status":"publish","type":"post","link":"https:\/\/ncertsolutions.guru\/ncert-solutions-for-class-12-accountancy-chapter-10\/","title":{"rendered":"NCERT Solutions for Class 12 Accountancy Chapter 10 Accounting Ratios"},"content":{"rendered":"

Detailed, Step-by-Step NCERT Solutions for 12 Accountancy<\/a> Chapter 10 Accounting Ratios Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.<\/p>\n

Accounting Ratios NCERT Solutions for Class 12 Accountancy Chapter 10<\/h2>\n

Accounting Ratios Questions and Answers <\/span>Class 12 Accountancy Chapter 10<\/h3>\n

Test Your Understanding-I (Page No. 241)<\/span><\/p>\n

State which of the following statements are True or False :<\/p>\n

(a) The only purpose of financial reporting is to keep the managers informed about the progress of operations.
\n(b) Analyses of data provided in the financial statements as is termed as financial analysis.
\n(c) Long-term creditors are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount of term.
\n(d) A ratio is always expressed as a quotient of one number divided by another
\n(e) Ratios help in comparisons of a firm’s results over a number of accounting periods as well as with other business enterprises.
\n(f) One ratio reflect both quantitative and qualitative aspects.
\nAnswer:
\n(a) False
\n(b) True
\n(c) True
\n(d) False
\n(e) True
\n(f) False.<\/p>\n

\"NCERT<\/p>\n

On Test Your Understanding-II (Page No. 255)<\/span><\/p>\n

Question 1.
\nThe following groups of ratios primarily measure risk\u2014
\n(a) liquidity, activity, and profitability
\n(b) liquidity, activity and common stock
\n(c) liquidity, activity and debt
\n(d) activity, debt and profitability
\nAnswer:
\n(d) activity, debt and profitability<\/p>\n

Question 2.
\nThe ratios are primarily measures of return.
\n(a) liquidity
\n(b) activity
\n(c) debt
\n(d) profitability
\nAnswer:
\n(b) activity<\/p>\n

Question 3.
\nThe of a business firm is measured by its ability to satisfy its short-term obligations as they come due.
\n(a) activity
\n(b) liquidity
\n(c) debt
\n(d) profitability
\nAnswer:
\n(b) liquidity<\/p>\n

\"NCERT<\/p>\n

Question 4
\nratios are a measure of the speed with which various accounts are converted into sales or cash.
\n(a) Activity
\n(b) Liquidity
\n(c) Debt
\n(d) Profitability
\nAnswer:
\n(a) Activity<\/p>\n

Question 5.
\nThe two basic measures of liquidity are
\n(a) inventory turnover and current ratio
\n(b) current ratio and liquid ratio
\n(c) gross profit margin and operating ratio
\n(d) current ratio and average collection period
\nAnswer:
\n(b) current ratio and liquid ratio.<\/p>\n

Question 6.
\nThe is a measure of liquidity which excludes generally the least liquid asset.
\n(a) current ratio, accounts debtors
\n(b) liquid ratio, accounts debtors
\n(c) current ratio, inventory
\n(d) liquid ratio, inventory
\nAnswer:
\n(d) liquid ratio, inventory.<\/p>\n

Test Your Understanding-III (Page No. 262)<\/span><\/p>\n

Question 1.
\nThe ……….. is useful in evaluating credit and collection policies.
\n(a) average payment period
\n(b) current ratio
\n(c) average collection period
\n(d) current asset turnover
\nAnswer:
\n(c) average collection period<\/p>\n

Question 2.
\nThe measures the activity of a firm’s inventory.
\n(a) average collection period
\n(b) inventory turnover
\n(c) liquid ratio
\n(d) current ratio
\nAnswer:
\n(b) inventory turnover<\/p>\n

\"NCERT<\/p>\n

Question 3.
\nThe ratio may indicate the firm is experiencing stock outs and last sales.
\n(a) average payment period
\n(b) inventory turnover
\n(c) average collection period
\n(d) quick
\nAnswer:
\n(a) average payment period<\/p>\n

Question 4.
\nABC Co. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was …….
\n(a) 30 days
\n(b) 36 days
\n(c) 47 days
\n(d) 57 days
\nAnswer:
\n(c) 47 days<\/p>\n

Question 5.
\n………… are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm.
\n(a) Customers
\n(b) Stockholders
\n(c) Lenders and suppliers
\n(d) Borrowers and buyers
\nAnswer:
\n(c) Lenders and suppliers<\/p>\n

Question 6.
\nThe ………… ratios provide the information critical to the long-run operation of the firm.
\n(a) liquidity
\n(b) activity
\n(c) solvency
\n(d) profitability
\nAnswer:
\n(c) solvency<\/p>\n

\"NCERT<\/p>\n

Do it Yourself (Page No. 247)<\/span><\/p>\n

Question 1.
\nCurrent ratio = 4.5 :1, quick ratio = 3:1. Inventory is Rs. 36,000. Calculate the current assets and current liabilities.
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

Question 2.
\nCurrent liabilities of a company are Rs. 5,60,000, current ratio is 5:2 and quick ratio is 2 :1. Find the value of the stock.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Question 3.
\nCurrent assets of a company are Rs. 5,00,000. Current ratio is 2.5 : 1 and quick ratio is 1 : 1. Calculate the value of current liabilities, liquid assets and stock.
\nAnswer:
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Do it Yourself (Page No. 257)<\/span><\/p>\n

Question 1.
\nCalculate the amount of gross profit:
\nAverage stock = Rs. 80,000
\nStock turnover ratio = 6 times
\nSelling price = 25% above cost
\nAnswer:
\n\"NCERT<\/p>\n

Question 2.
\nCalculate Stock Turnover Ratio :
\nAnnual sales = Rs. 2,00,000
\nGross Profit = 20% on cost of Goods Sold
\nOpening stock = Rs. 38,500
\nClosing Stock = Rs. 41,500
\nAnswer:
\n\"NCERT
\n\"NCERT<\/p>\n

\"NCERT<\/p>\n

Short Answer Type Questions<\/span><\/p>\n

Question 1.
\nWhat do you mean by Ratio Analysis?
\nAnswer:
\nRatio Analysis: The English word ratio comes directly from Latin. The Latin word has many derivates in the English language, among them are reason\/ratio, rational and relational. Ratio is defined formally as “the indicated quotient of two mathematical expressions”\u2014 and indeed, a ratio does result from the division of one number into another\u2014and as “the relationship between two or more things”.<\/p>\n

An operational definition of a financial ratio is the relationship between two financial values. The word “relationship” implies that a financial ratio is the result of comparing mathematically two values.<\/p>\n

And this numerical comparison is important, for these ratios are used as indexes, and as indexes, they are used to make qualitative judgements about the financial health of the firm.<\/p>\n

Analysis of the firm by financial ratios enables the financial manager as well as interested external parties, to evaluate the firm’s financial performance and condition rapidly by making comparisons of ratios obtained from the firm with ratios obtained from comparable firms. Financial ratio also presents ready comparison of firm’s financial performance and condition over time as a way of identifying and evaluating performance trends.<\/p>\n

Ratio analysis requires considerable judgement and direction by the analyst if it is to serve as a basis for future financial and operating decisions. Rule of thumb and other mechanical interpretations may produce disastrous decisions by those who are ill-informed about the ambiguity of information that may be contained in ratios.<\/p>\n

Financial and operating relationships expressed in terms of ratios or otherwise have little significance except as they are judged on the basis of appropriate standards of comparison. Therefore, in interpreting the ratios of a particular business, the analyst cannot determine whether the ratios of a particular business indicates favourable or unfavourable conditions unless there are available measuring devices standards of comparison may consist of<\/p>\n