# MCQ Chapter 5 Accounting Ratios Class 12 Accountancy

Please refer to Accounting Ratios MCQ Questions Class 12 Accountancy below. These MCQ questions for Class 12 Accountancy with answers have been designed as per the latest NCERT, CBSE books and syllabus issued for the current academic year. These objective questions for Accounting Ratios will help you to prepare for the exams and get more marks.

## Accounting Ratios MCQ Questions Class 12 Accountancy

Please see solved MCQ Questions for Accounting Ratios in Class 12 Accountancy. All questions and answers have been prepared by expert faculty of standard 12 based on latest examination guidelines.

### MCQ Questions Class 12 Accountancy Accounting Ratios

Question. Calculate proprietary ratio: if share capital Rs. 5,00,000 ,reserve & surplus Rs. 2,00,000 and general reserve Rs. 1,00,000 and total assets RS 21,00,000.
(a) 0.33:1
(b) 0.38:1
(c) 0.48:1
(d) 0.50:1

A

Question. Current ratio 4:1, Current assets Rs. 60,000 quick assets are 2:5:1. Calculate inventory
(a) 22,500
(b) 37,500
(c) 15,000
(d) 25,000

A

Question. If cash sales is RS 2,00,000 and credit sales is 20% of total sales. Calculate amount of credit sales.
(a) Rs. 50,000
(b) Rs. 2,50,000
(c) Rs. 16,000
(d) Rs. 3,00,000

B

Question. Which of the following is not a limitation of analysis of financial statements?
(a) Affected by personal basis
(b) To know the financial strength
(c) Lack of qualitative analysis
(d) Based on accounting concepts

B

Question. ( A& E )Trade receivable turnover ratio 5 times, average trade receivables Rs. 60,000.Calculate net credit revenue from operations.
(a) Rs. 3,00,000
(b) Rs. 2,00,000
(c) Rs. 12,000
(d) Rs.2,40,000

A

Question. current ratio is 2:1 current assets =Rs. 82,000. What will be current liabilities?
(a) Rs. 41,000
(b) Rs. 38,000
(c) Rs. 15,000
(d) Rs. 20,000

B

Question. ( R)Parties interested in financial analysis are :
(a) Investors
(b) Government
(c) Financial institutions
(d) All of the above

D

Question. ( R)Main limitation of financial analysis is:
(a) To know the earning capacity
(b) To know financial strength
(c) Do not reflect changes in price level.
(d) Comparative study with other firms.

C

Question. Fixed assets of a company are increased from Rs. 3,00,000 to Rs. 4,00,000.What is the percentage change?
(a) 25%
(b) 33.3%
(c) 20%
(d) 40%

B

Question. Current ratio 1.5 :1, Working capital Rs. 30,000.What will be the current liabilities:
(a) 20.000
(b) 60.000
(c) 1,65,000
(d) 1,50,000

B

Question. Financial analysis become useless because it :
(a) Measures the profitability
(b) Measures the solvency
(c) Lacks qualitative analysis
(d) Marks a comparative study

C

Question. A Company’s working capital is Rs. 10 lakhs (Negative Balance) in the year 2018. It became Rs. 15 lakhs in the year 2019.What is the percentage of change?
(a) 150%
(b) 100%
(c) 250%
(d) 50%

A

Question. A company’s revenue from operations are Rs. 20,00,000,Cost of revenue from operations is Rs. 14,00,000 and indirect expenses are Rs. 2,00,000.What is the amount of gross profit?
(a) Rs. 18 Lakhs
(b) Rs. 4 Lakhs
(c) Rs. 8 Lakhs
(d) Rs. 6 Lakhs

D

Question. Total assets of a firm areRs. 20,00,000 and its fixed assets are Rs. 8,00,000.What will be the percentage of Fixed assets on total assets?
(a) 40%
(b) 58%
(c) 28%
(d) 71%

A

Question. A company’s current liabilities decreased from Rs. 4,00,000 to Rs. 3,00,000.What is the percentage of change?
(a) 25%
(b) 33.3%
(c) 20%
(d) 40%

B

Question.  Debt equity ratio is:
(a) Short term solvency ratio
(b) Long term solvency ratio
(c) Liquidity ratio
(d) Profitability ratio

B

Question. Current ratio is also known as :-
(a) Solvency Ratio
(b) Acid Test Ratio
(c) Working Capital Ratio
(d) Liquid Ratio

C

Question. Securities premium reserve included in :-
(a) Debt
(b) Equity
(c) Liquid assets
(d) Cost of revenue from operations

B

Question. Total assets of a firm are Rs. 8,20,000 and its fixed assets are Rs. 5,90,000.What will be the percentage of current assets on total assets.
(a) 42%
(b) 58%
(c) 28%
(d) 72%

C

Question. What is trade investment?
(a) Trading in securities
(b) Investment in his own business
(c) Investment in other company for promotion of his own business
(d) None of the above

C

Question.  If net revenue from operations of a firm are Rs. 15,00,000, Gross profit is Rs. 9,00,000 and operating expenses are Rs. 75,000. What will be the percentage of operating income on net revenue
from operations?
(a) 45%
(b) 55%
(c) 35%
(d) 65%

B

Question. If the liquid ratio of a company is 1.5:1,then the company purchased goods of Rs. 50,000.
(a) Decrease in liquid ratio
(b) Increase in liquid assets
(c) Decrease in current liability
(d) Increase in liquid ratio

A

Question. If capital employed is Rs 8,00,000,total debt is Rs 5,00,000,current liability is Rs 2,00,000 then debt equity ratio will be
(a) 5:3
(b) 3:5
(c) 1:1
(d) 8:5

B

Question. Current ratio is:
(a) Solvency Ratio
(b) Liquidity ratio
(c) Activity Ratio
(d) Profitability Ratio

B

Question.Current Ratio is :
(a) Liquid Assets/Current Assets
(b) Fixed Assets/Current Assets
(c) Current Assets/Current Liabilities
(d) Liquid assets/Current Liabilities

C

Question.Liquid Assets do not include:
(a) Bills Receivable
(b) Debtors
(c) Inventory
(d) Bank Balance

C

Question.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

B

Question.Ideal Current Ratio is:
(a) 1:1
(b) 1:2
(c) 1:3
(d) 2:1

D

Question. Working Capital is the :
(a) Cash and Bank Balance
(b) Capital borrowed from Banks
(c) Difference between Current Assets and Current Liabilities
(d) Difference between Current Assets and Fixed assets

C

Question.A Company’s liquid assets are Rs.5,00,000 and its current liabilities are Rs.3,00,000.Thereafter, it paid Rs.1,00,000 to its trade payables. Quick ratio will be:
(a) 1.33:1
(b) 2.5:1
(c) 1.67:1
(d 2:1

D

Question. Total revenue from operations Rs.9,00,000; Cash revenue from operations Rs.3,00,000; Debtors Rs.1,00,000; 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

A

Question. A Company’s Quick Ratio is 1.5:1; Current Liabilities are Rs.2,00,000 and Inventory is Rs.1,80,000.Current Ratio will be:
(a) 0.9:1
(b) 1.9:1
(c) 1.4:1
(d) 2.4:1

D

Question. Fixed Assets Rs.5,00,000; Current Assets Rs.3,00,000; Equity Share Capital Rs.4,00,000; Reserve Rs.2,00,000;Long –term debts Rs.40,000.Proprietory Ratio will be:
(a) 75%
(b) 80%
(c) 125%
(d) 133%

A

Question.Current assets include only those assets which are expected to be realized within……
(a) 3 months
(b) 6 months
(c) 1 year
(d) 2 years

C

Question.Equity Share Capital Rs.20,00,000; Reserves Rs.5,00,000; Debentures Rs.10,00,000; Current Liabilities Rs.8,00,000. Debt-equity ratio will be:
(a) 0.4 : 1
(b) 0.32 : 1
(c) 0.72 : 1
(d) 0.5 : 1

A

Question: 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

B

Question: 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

D

Question: 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

C

Question: 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

B

Question: Current Ratio is :
(a) Solvency Ratio
(b) Liquidity Ratio
(c) Activity Ratio
(d) Profitability Ratio

B

Question: Current Ratio is :
(a) Liquid Assets/Current Assets
(b) Fixed Assets/Current Assets
(c) Current Assets/Current Liabilities
(d) Liquid Assets/Current Liabilities

C

Question: Debt Equity Ratio is :
(a) Liquidity Ratio
(b) Solvency Ratio
(c) Activity Ratio
(d) Operating Ratio

B

Question: 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

A

Question: 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

C

Question: 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.

A

Question: 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.

B

Question: 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.

C

Question: 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

A

Question: 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.

C

Question: Two basic measures of liquidity are :
(a) Inventory turnover and Current ratio
(b) Gross Profit ratio and Operating ratio
(c) Current ratio and Average Collection period
(d) Current ratio and Quick ratio

D

Question: 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%

D

Question: 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.

A

Question: 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

B

Question: 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

C

Question: Current Ratio of a Company is 2.5 : 1. If its working capital is Rs. 60,000, its current liabilities will be :
(a) Rs.60,000
(b) Rs. 1,00,000
(c) Rs.40,000
(d) Rs.24,000

C

Question: Quick Assets do not include
(a) Cash in hand
(b) Prepaid Expenses
(c) Marketable Securities

B

Question.If Debt equity ratio exceeds ……………., it indicates risky financial position.
(a) 1:1
(b) 2:1
(c) 1:2
(d) 3:1

B

Question.On the basis of the following information received from a firm, its Proprietory 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%

C

Question.A firm’s credit revenue from operations is Rs.3,60,000, cash revenue from operations is Rs.70,000. Cost of revenue from operations is Rs.3,61,200. Its gross profit ratio will be:
(a) 11%
(b) 15%
(c) 18%
(d) 16%

D

Question.Revenue from Operations Rs.2,00,000; Inventory Turnover ratio 5; Gross Profit 25%. Find out the value of Closing Inventory, if Closing Inventory is Rs.8,000 more than the Opening Inventory.
(a) Rs.38,000
(b) Rs.22,000
(c) Rs.34,000
(d) Rs.26,000

C

Question.On the basis of the following information received from a firm, its Total Assets-Debt ratio will be:
(a) 40%
(b) 60%
(c) 30%
(d) 70%

A

Question.Revenue from Operations Rs.6,00,000; Gross Profit 20%; Office Expenses Rs.30,000;Selling Expenses Rs.48,000.Calculate operating ratio.
(a) 80%
(b) 85%
(c) 96.33%
(d) 93%

D

Question. If average inventory is Rs. 30,000 and closing inventory is Rs. 20,000 more than the opening,what will be the value of closing inventory?
(a) Rs. 10,000
(b) Rs. 20,000
(c) Rs. 30,000
(d) Rs. 40,000

D

Question If Revenue from operations is Rs 12,00,000 and cash revenue from operations is 20% if credit revenue from operations . What will be credit revenue from operations :
(a) Rs 2,00,000
(b) Rs 8,00,000
(c) Rs 10,00,000
(d) Rs 12,00,000

C

Question. Provisions for employee benefits is shown under the sub head

short term provisions

Question. Prepaid expenses are shown under the main head ________ in the balance sheet of the company.

current assets

Question. Earning capacity of a business is assessed through ________ ratio.

profitability

Question. The statement which shows the assets and liabilities of a company is called _______________

Balance sheet.

Question. If the operating cycle cannot be identified then it is assumed to have a duration of_______________

12 months.

Question. Provision for tax is shown under the sub head___________

short term provisions.

Question. Liquidity or short term financial position of a business is assessed through__________ ratio.

Liquidity

Question. State whether the following statement is True or False:
Current ratio improves with increase in sales at profir.

True

Question: Lower the Gross Profit Ratio, higher will be the profitability of a company.

False

Question: Solvency refers to the ability of the enterprise to meet its current obligations.

True

Question. Fill in the blanks with appropriate word:……………
is the process of determining and interpreting numerical relationship between figures of the financial statements.

Question.Fill in the blanks with appropriate word:
An ideal Quick Ratio is ……………

1:1

Question. Solvency of business is assessed through ______

solvency ratio

Question. Statement of Profit and Loss account is also called___________

Income statement.

Question. Financial year in case of a company is from _____ to _______

1 April 31 March.

Question. Common size statements enable horizontal analysis.

False

Question. Financial statements show qualitative information.

False

Question. Revenue from operations includes sale of products and sale of services.

True

Question. 12% borrowings in a company‘s balance sheet is shown under the sub heading long term borrowings.

True

Question. Interest accrued and due on debenture is shown under the heading non-current liabilities.

False

Question. Contingent liabilities are shown in the balance sheet under the heading current liabilities.

False

Question. Vertical analysis is useful in time series analysis.

False

Question. 12% borrowings in a company‘s balance sheet is shown under the sub heading long term borrowings.

True

Question. Financial analysis removes the limitations of financial statements.

False

Question. A total asset is assumed to be 100 on the asset side in case of common size balance sheet.