Table of Contents
NCERT MCQ ON Accounting Ratios:
Question1: Accounting ratios are an important tool of
- a) Financial statement analysis
- b) Trial Balance
- c) Financial statement analysis and Trial Balance
- d) None of the options
Answer: Financial statement analysis
Question2: When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as
- a) Accounting ratio
- b) Financial ratio
- c) Costing ratio
- d) None of the options
Answer: Accounting ratio
Question3: Which ratio is considered as safe margin of solvency?
- a) Current ratio
- b) Liquid ratio
- c) Current ratio
- d) None of the options
Answer: Current ratio
Question4: Current ratio is stated as a crude ratio because
- a) It measures only the quantity of current assets
- b) It measures only the quality of current assets
- c) It measures only the quantity of current assets and It measures only the quality of current assets
- d) None of the options
Answer: It measures only the quantity of current assets
Question5: Liquid ratio is also known as
- a) Quick ratio and Acid test ratio
- b) Quick ratio
- c) Acid test ratio
- d) None of the options
Answer: Quick ratio and Acid test ratio
Question6: Debt-equity ratio is a sub-part of
- a) Long-term solvency ratio
- b) Debtors turnover ratio
- c) Short-term solvency ratio
- d) None of the options
Answer: Long-term solvency ratio
Question7: Liquid assets is determined by
- a) Current assets-stock-Prepaid expenses
- b) Current assets +stock+ prepaid expenses
- c) Current assets +Prepaid expenses
- d) None of the options
Answer: Current assets-stock-Prepaid expenses
Question8: Higher the ratio, the more favourable it is, doesn t stands true for
- a) Operating ratio
- b) Liquidity ratio
- c) Net profit ratio
- d) Stock turnover ratio
Answer: Operating ratio
Question9: The most precise test of liquidity is
- a) Absolute Liquid ratio
- b) Quick ratio
- c) Current ratio
- d) None of the options
Answer: Absolute Liquid ratio
Question10: Collection of debtors
- a) Decreases current ratio
- b) Increases current ratio
- c) Has no effect on current ratio
- d) None of the options
Answer: Decreases current ratio
Question11: In ABC analysis A class consist of items having
- a) Accurate records
- b) Good records
- c) Minimal records
- d) No records
Answer: Accurate records
Question12: In the Balance sheet of a firm, the debt equity ratio is 2:1.The amount of long term sources is Rs.12 lac. What is the amount of tangible net worth of the firm?
- a) Rs.8 lakh
- b) Rs.6 lakh
- c) Rs.4 lakh
- d) None of the options
Answer: Rs.8 lakh
Question13: Accounting Ratios are mathematical expression of the relationship between
- a) Two Accounting Figures
- b) Two Shareholders
- c) Two Debtors
- d) None of the options
Answer: Two Accounting Figures
Question14: Ratio Analysis is a tool to measure the
- a) Financial Status
- b) Profit status
- c) Loss Status
- d) None of the options
Answer: Financial Status
Question15: When ratios are calculated on the basis of accounting information, they are called
- a) Accounting ratios
- b) Working Capital Ratio
- c) Profit ratio
- d) None of the options
Answer: Accounting ratios
Question16: Objectives of Ratio Analysis
- a) All of the options
- b) To know the areas of an enterprise which need more attention
- c) To know about the potential areas which can be improved on
- d) Helpful in comparative analysis of the performance
Answer: All of the options
Question17: Ratio Analysis helpful in
- a) Comparative analysis of the performance and Budgeting and forecasting
- b) Comparative analysis of the performance
- c) Budgeting and forecasting
- d) None of the options
Answer: Comparative analysis of the performance and Budgeting and forecasting
Question18: Ratio Analysis provide analysis of the
- a) Liquidity
- b) Solvency
- c) Profitability
- d) None of the options
Answer: Liquidity
Question19: Ratio Analysis provide information useful for
- a) Preparing the plans for future
- b) Share holders
- c) Debentures holder
- d) None of the options
Answer: Preparing the plans for future
Question20: Advantages of Ratio Analysis
- a) All of the options
- b) It is useful in analysis of key financial figures
- c) It is useful in analysis of financial statements
- d) Better understand financial numbers
Answer: All of the options
Question21: Current ratio is stated as a crude ratio because
- a) It measures only the quantity of current assets
- b) It measures only the quality of current assets
- c) It measures only the quantity of current assets and It measures only the quality of current assets
- d) None of the options
Answer: It measures only the quantity of current assets
Question22: Limitations of Ratio Analysis
- a) All of the options
- b) Accounting ratios ignore qualitative factors
- c) Absence of universally accepted terminology
- d) Ratios are affected by window-dressing
Answer: All of the options
Question23: Ratio Analysis Price level changes
- a) Ignored
- b) Noticed
- c) Ignored and Noticed
- d) None of the options
Answer: Ignored
Question24: Ratio Analysis ignored
- a) Qualitative factors
- b) Quantity Factors
- c) Qualitative factors and Quantity Factors
- d) None of the options
Answer: Qualitative factors
Question25: Ratio Analysis affected by
- a) All of the options
- b) Window-dressing
- c) Personal bias
- d) Ability of the analyst
Answer: All of the options
Question26: An accounting ratio is a
- a) Mathematical expression
- b) Logical expression
- c) Mathematical expression and Logical expression
- d) None of the options
Answer: Mathematical expression
Question27: Accounting ratios classified as under
- a) All of the options
- b) Liquidity Ratios
- c) Current ratio
- d) Solvency Ratios
Answer: All of the options
Question28: Current ratio is also known as
- a) Working capital ratio
- b) Profit Sharing Ratio
- c) Working capital ratio and Profit Sharing Ratio
- d) None of the options
Answer: Working capital ratio
Question29: Which Ratio establishes relationship between current assets and current liabilities
- a) Current ratio
- b) Liquidity Ratios
- c) Solvency Ratios
- d) None of the options
Answer: Current ratio
Question30: Current Ratio is
- a) Current Assets/Current Liabilities
- b) Current Assets-Current Liabilities
- c) Current Assets x Current Liabilities
- d) None of the options
Answer: Current Assets/Current Liabilities
Question31: Which Items Included in Current Assets for get the current ratio
- a) All of the options
- b) Current investments
- c) Current Stock
- d) Trade receivables (bills receivable and sundry debtors less provision for doubtful debts)
Answer: All of the options
Question32: Which Items Included in Current Assets for get the current ratio
- a) All of the options
- b) Short-term borrowings
- c) Cash balance
- d) Short-term provisions
Answer: All of the options
Question33: Liquid ratio is also known as
- a) Quick Ratio and Test Ratio
- b) Quick Ratio
- c) Test Ratio
- d) None of the options
Answer: Quick Ratio and Test Ratio
Question34: Liquid Ratio is
- a) Liquid Assets or Quick Assets/Current Liabilities
- b) Liquid Assets or Quick Assets+Current Liabilities
- c) Liquid Assets or Quick Assets-Current Liabilities
- d) None of the options
Answer: Liquid Assets or Quick Assets/Current Liabilities
Question35: Items Included in Liquid/Quick Assets
- a) All of the options
- b) Items Included in Liquid/Quick Assets
- c) Trade receivables
- d) Cash and cash equivalents
Answer: All of the options
Question36: Items excluded in liquid assets are
- a) Inventories and prepaid expenses
- b) Inventories
- c) Prepaid expenses
- d) None of the options
Answer: inventories and prepaid expenses
Question37: Which ratios judge the long-term financial position of an enterprise
- a) Solvency Ratios
- b) Quick Ratio
- c) Test Ratio
- d) None of the options
Answer: Solvency Ratios
Question38: Establishes the relationship between long-term debt (external equities) and the equity (internal equities)
- a) Debt to Equity ratio
- b) Quick Ratio
- c) Test Ratio
- d) None of the options
Answer: Debt to Equity ratio
Question39: Debt to Equity ratio establishes the relationship between
- a) long-term debt (external equities) and the equity (internal equities)
- b) long-term debt (external equities) and the current Assets(internal equities)
- c) long-term debt (external equities) and the equity (internal equities) and long-term debt (external equities) and the current Assets(internal equities)
- d) None of the options
Answer: long-term debt (external equities) and the equity (internal equities)
Question40: Debt to Equity Ratio is
- a) Debt (Long-term external equities)+Equity (Shareholders funds)
- b) Debt (Long-term external equities)-Equity (Shareholders funds)
- c) Debt (Long-term external equities)+Equity (Shareholders funds) and Debt (Long-term external equities)-Equity (Shareholders funds)
- d) None of the options
Answer: Debt (Long-term external equities)+Equity (Shareholders funds)
Question41: Cash Balance Rs.5,000; Trade Payables Rs.40,000; Inventory Rs.50,000; Trade Receivables Rs.65,000 and Prepaid Expenses are Rs. 10,000. Liquid Ratio will be
a) 1.75 : 1
b) 2 : 1
c) 3.25 : 1
d) 3 : 1
Answer: A
Question42: Current Assets Rs.4,00,000; Current Liabilities Rs.2,00,000 and Inventory is Rs.50,000. Liquid Ratio will be :
a) 2 : 1
b) 2.25 : 1
c) 4 : 7
d) 1.75 : 1
Answer: D
Question43: Which of the following transactions will improve the Current Ratio :
a) Cash Collected from Trade Receivables
b) Purchase of goods for cash
c) Payment to Trade Payables
d) Credit purchase of Goods
Answer: C
Question44: Current Assets Rs.85,000; Inventory Rs.22,000; Prepaid Expenses Rs.3,000. Then liquid assets will be :
a) Rs.63,000
b) 60,000
c) X 82,000
d) X 1,10,000
Answer: B
Question45: A Company’s Quick Ratio is 1.5 : 1; Current Liabilities are Rs.2,00,000 and Inventory is X 1,80,000. Current Ratio will be :
a) 0.9:1
b) 1.9:1
c) 1.4:1
d) 2.4:1
Answer: D
Question46: A Company’s Quick Ratio is 1.8 : 1; Liquid Assets are Rs.5,40,000 and Inventory is Rs. 1,50,000. Its Current Ratio will be :
a) 2 : 1
b) 2.3 : 1
c) 1.8:1
d) 1.3:1
Answer: B
Question47: What will be the amount of Gross Profit, if revenue from operations are Rs.6,00,000 and Gross Profit Ratio 20% of revenue from operations?
a) Rs. 1,50,000
b) Rs. 1,00,000
c) Rs. 1,20,000
d) Rs. 5,00,000
Answer: C
Question48: Revenue from operations is Rs. 1,80,000; Rate of Gross Profit is 25% on cost. What will be the Gross Profit?
a) Rs.45,000
b) Rs.36,000
c) Rs.40,000
d) Rs.60,000
Answer: B
Question49: Operating ratio is :
a) Cost of revenue from operations + Selling Expenses/Net revenue from operations
b) Cost of production + Operating Expenses/Net revenue from operations
c) Cost of revenue from operations + Operating Expenses/Net Revenue from Operations
d) Cost of Production/Net revenue from operations.
Answer: C
Question50: Two basic measures of liquidity are :
a) Inventory turnover and Current ratio
b) Current ratio and Quick ratio
c) Gross Profit ratio and Operating ratio
d) Current ratio and Average Collection period
Answer: B
Question51: Current Ratio is :
a) Solvency Ratio
b) Liquidity Ratio
c) Activity Ratio
d) Profitability Ratio
Answer: B
Question52: Current Ratio is :
a) Liquid Assets/Current Assets
b) Fixed Assets/Current Assets
c) Current Assets/Current Liabilities
d) Liquid Assets/Current Liabilities
Answer: C
Question53: Debt Equity Ratio is :
a) Liquidity Ratio
b) Solvency Ratio
c) Activity Ratio
d) Operating Ratio
Answer: B
Question54: Debt Equity Ratio is :
a) Long Term Debts/Shareholder’s Funds
b) Short Term Debts/Equity Capital
c) Total Assets/Long term Debts
d) Shareholder’s Funds/Total Assets
Answer: A
Question55: Proprietary Ratio is :
a) Long term Debts/Shareholder’s Funds
b) Total Assets/Shareholder’s Funds
c) Shareholder’s Funds/Total Assets
d) Shareholder’s Funds/Fixed Assets
Answer: C
Question56: lf Current Ratio ofa firm is 2.5 :1 and its Current Liabilities are ,00,000. Its Working Capital will be
a) 3,00,000.
b) 3,75,000.
c) 11,00,000.
d) 7,00,000.
Answer: A
Question57: Non-current Assets of a firm are 26,00,000, Current Assets are 9,00,000 and Shareholders’ Funds are 21,50, 000.TotaI debts of the firm will be
a) 43,50,000.
b) 13,50,000.
c) 21,50,000.
d) 38,50,000.
Answer: B
Question58: Sincere Ltd. has a Proprietary Ratio of 25%. To maintain this ratio at 30%, management may ~
a) increase Equity.
b) Reduce Debt.
c) Either Increase Equity or Reduce Debt.
d) lncrease Current Assets.
Answer: C
Question59: From the following, which ratio is not a part of Profitability Ratio:
a) Proprietary Ratio
b) Gross Profit Ratio
c) Operating Ratio
d) Net Profit Ratio
Answer: A
Question60: From the following information, calculate Proprietary Ratio: Share Capital 5,00,000, Non- current Assets 22,00,000, Reserves and Surplus 3,00,000, Current Assets 10,00,000.
a) 100%
b) 70%
c) 40%
d) 25%
Answer: D
Question61: The two basic measures of operational efficiency of a company are
a) Inventory Turnover Ratio and Working Capital Turnover Ratio
b) Liquid Ratio and Operating Ratio.
c) Liquid Ratio and Current Ratio.
d) Gross Profit Margin and Net Profit Margin.
Answer: A
Question62: A Company’s Current Ratio is 3 : 1 and Liquid Ratio is 1.2 : 1. If its Current Liabilities are Rs.2,00,000, what will be the value of Inventory?
a) Rs.2,40,000
b) Rs.3,60,000
c) Rs.4,00,000
d) Rs.40,000
Answer: B
Question63: A Company’s Current Ratio is 2.5 : 1 and Liquid Ratio is 1.6 : 1. If its Current Assets are Rs.7,50,000, what will be the value of Inventory?
a) Rs.4,50,000
b) Rs.4,80,000
c) Rs.2,70,000
d) Rs. 1,80,000
Answer: C
Question64: Current Ratio of a Company is 2.5 : 1. If its working capital is Rs. 60,000, its current liabilities will be :
a) Rs.40,000
b) Rs.60,000
c) Rs. 1,00,000
d) Rs.24,000
Answer: A
Question65: Quick Assets do not include
a) Cash in hand
b) Prepaid Expenses
c) Marketable Securities
d) Trade Receivables
Answer: B
Question66: Current Assets do not include :
a) Prepaid Expenses
b) Inventory
c) Goodwill
d) Bills Receivable
Answer: C
Question67: Quick Ratio is also known as :
a) Liquid Ratio
b) Current Ratio
c) Working Capital Ratio
d) None of the Above
Answer: A
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