# MCQ of Accounting Ratios | Class 12 | Accountancy | Term-1 | CBSE |

**MCQ of Accounting Ratios, Class 12, Accountancy, Term-1, CBSE**

**Q1. ………. involves the comparison of a firm’s ratio with that of some selected firms in the same industry or industry average at the same point of time.**

- Time series analysis
- Cost analysis
- Cross sectional analysis
- Data analysis

**Answer: Cross sectional analysis**

**Q2. …………. involves comparison of a firm’s present ratio with its past ratios.**

- Time series analysis
- Cost analysis
- Cross sectional analysis
- Data analysis

**Answer: Time series analysis**

**Q3. the objective of ratio analysis is to**

- place an exact value of goodwill
- Ascertain the payment of cash and cash equivalent
- Locate the weak spots of business which need more attention
- Provide summary of personal and real account

**Answer: Locate the weak spots of business which need more attention**

**Q4. Current assets does not include**

- Short term loan and advance
- Short term borrowing
- Current investment
- Trade receivable

**Answer: Short term borrowing**

**Q5. ……. ratios are calculated on the basis of ‘Cost of revenue from Operation’.**

- Liquidity ratio
- Solvency ratio
- Activity ratio
- Profitability ratio

**Answer: Activity ratio**

**Q6. Current ratio =**

- Current liability/ Current assets
- Current assets/ Current liabilities
- Liquid assets/ Current liabilities
- Current liabilities/ Liquid aassets

**Answer: Current assets/ Current liabilities**

**You may also read MCQ of Accounting For Partnership Firm-Fundamentals, MCQ of Change in Profit Sharing Ratio, MCQ of Admission of a Partner, MCQ of Financial Statements of Companies for better score and understanding of Accountancy.**

**Q7. Quick ratio =**

- Current liabilities/ Current assets
- Current assets/ Current liabilities
- Liquid assets/ Current liabilities
- Current liabilities/ Liquid assets

**Answer: Liquid assets/ Current liabilities**

**Q8. Two basic measures of liquidity involve**

- Current ratio and average collection period
- Gross profit margin and operating ratio
- Current ratio and liquid ratio
- Inventory turnover and current ratio

**Answer: Current ratio and liquid ratio**

**Q9. Which of the following is an ideal current ratio?**

- 1:2
- 2:1
- 1:1
- 1:3

**Answer: 2:1**

**Q10. Which of the following is an ideal Quick ratio?**

- 1:2
- 2:1
- 1:1
- 1:3

**Answer: 1:1**

**Q11. Solvency ratio includes **

- Gross profit ratio
- Interest coverage ratio
- Net profit ratio
- Operating ratio

**Answer: Interest coverage ratio**

**Q12. Profitability ratio is also known as**

- Debt equity ratio
- Proprietary ratio
- Income ratio
- Total assets to debt ratio

**Answer: Income ratio**

**Q13. Profitability ratio includes**

- Proprietary ratio
- Return on investment
- Interest coverage ratio
- Debt equity ratio

**Answer: Return on investment**

**Q14. Current assets doesn’t include**

- Trade payable
- Short term loan
- Current investment
- Cash and cash equivalent

**Answer: Trade payable**

**Q15. Current liabilities don’t include**

- Short term loan
- Short term provision
- Short term borrowing
- Sundry creditors

**Answer: Short term loan**

**Q16. Activity ratios include**

- Proprietary ratio
- Debt equity ratio
- Operating ratio
- Stock turnover ratio

**Answer: Stock turnover ratio**

**Q17. Turnover ratio is also called as**

- Net profit ratio
- Activity ratio
- Income ratio
- Solvency ratio

**Answer: Activity ratio**

**Q18. Formula for calculating liquid assets is**

- Inventories – Prepaid expense + current assets
- Current assets + Inventories – advance tax
- Current assets – inventories – prepaid expenses
- Prepaid expenses – current assets

**Answer: Current assets – inventories – prepaid expenses**

**Q19. ………… Ratio is expressed as relationship between long term debts and shareholder’s funds.**

- Total assets to debt ratio
- Debt equity ratio
- Current ratio
- Liquidity ratio

**Answer: Debt equity ratio**

**Q20. ……… Ratio is expressed as relationship between total assets and long term debts.**

- Total assets to debt ratio
- Debt equity ratio
- Current ratio
- Liquidity ratio

**Answer: Total assets to debt ratio**

**Q21. Working capital =**

- Current assets / Current liabilities
- Current assets – Current liabilities
- Current liabilities / Current assets
- Current liabilities – Current assets

**Answer: Current assets – Current liabilities**

**Q22. One of the objectives of profitability ratio is**

- to measure the rate of net profit earned on revenue from operation
- to measure the margin of profit available on revenue from operation
- to measure how efficiently the capital employed in the business is being used
- None of the above

**Answer: To measure the margin of profit available on revenue from operation**

**Q23. One of the objectives of Net Profit Ratio is **

- to measure the rate of net profit earned on revenue from operation
- to measure the margin of profit available on revenue from operation
- to measure how efficiently the capital employed in the business is being used
- None of the above

**Answer: To measure the rate of net profit earned on revenue from operation**

**Q24. Return on investment is also known as**

- Capital investment
- Net return
- Yield on capital
- Capital employed

**Answer: Yield on capital**

**Q25. Ability of the business to pay its long term liabilities is called**

- Profitability of business
- Liquidity of business
- Solvency of business
- Insolvency of business

**Answer: Solvency of business**

**Q26. Earning capacity of the business is called**

- Profitability of business
- Liquidity of business
- Solvency of business
- Insolvency of business

**Answer: Profitability of business**

**Q27. One of the limitations of accounting ratio is that it ignore ……… factors.**

- Quantitative
- Qualitative
- Definitive
- Gross

**Answer: Qualitative**

**Q28. Calculate current ratio **

- 1:2
- 2:1
- 1:3
- 2:3

**Answer: 2:1**

**Q29. ****Current Ratio is 3:5:1**

**Working Capital : Rs. 90,000**

**Calculate the amount of Current Assets and Current ****Liabilities.**

- Current liabilities 36000 and current assets 126000
- Current liabilities 25 000 and current assets 120000
- Current liabilities 30000 and current assets 125000
- Current liabilities 34000 and current assets 124000

**Answer: Current liabilities 36000 and current assets 126000**

**Q30. Handa Ltd. had inventory of Rs. 20,000. Total Liquid assets are Rs. 1,00,000 and quick ratio is 2:1. Calculate the current ratio.**

- 1 : 2.4
- 2 : 1
- 2.4 : 1
- 1:3

**Answer: 2.4:1**

**Q31. Calculate Inventory Turnover Ratio if : **

**Inventory in the beginning is Rs. 76,250**

**Inventory at the end is Rs. 98,500**

**Gross Revenue from operations is Rs. 5,20,000**

**Return Inwards is Rs. 20,000.**

**Purchase is Rs. 3,22,250**

- 2 times
- 3.43 times
- 4.5 times
- 5 times

**Answer: 3.43 times**

**Q32.**

- Quick ratio 0.54 : 1 ; inventory turnover ratio 3.74 times ; return on investment 41.17 %
- Quick ratio 0.2 : 1 ; inventory turnover ratio 2 times ; return on investment 51.3 %
- Quick ratio 0.35 : 1 ; inventory turnover ratio 3.12 times ; return on investment 36.3 %
- Quick ratio 1:2 ; inventory turnover ratio 2.54 times ; return on investment 39.2 %

**Answer: Quick ratio 0.54 : 1 ; inventory turnover ratio 3.74 times ; return on investment 41.17 %**

**Q33. Calculate ‘Debt-Equity Ratio’ from the following information.**

**Total Assets : Rs. 3,50,000**

**Total Debt : Rs. 2,50,000**

**Current Liabilities : Rs. 80,000**

- 1:2
- 1.7 : 1
- 2.1 : 1
- 3:1

**Answer: 1.7:1**

**Q34. Calculate interest coverage ratio from the following information.**

**Net profit (After Taxes) = Rs. 1,00,000**

**Fixed Interest charges on long term borrowing = Rs. 20,000**

**Rate of Income Tax : 50%**

- 9 times
- 10 times
- 11 times
- 13 times

**Answer: 11 times**

**Q35. Cost of revenue from operations is Rs. 5,00,000. The opening stock is Rs. 40,000 and the closing stock is Rs. 60,000 (at cost). Calculate inventory turnover ratio.**

- 9 times
- 10 times
- 11 times
- 13 times

**Answer: 10 times**

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