Find the value of the stock. Question 7. A high Interest Coverage Ratio implies that the company can easily meet all its interest obligations out of its profit. Closing Inventory is more by ₹ 4,000 than the Opening Inventory. (a) The only purpose of financial reporting is to keep the managers informed about the progress of operations. 20,000 (cost). Net Credit Sales = Total Sales − Cash Sales2. 24,00,000; Quick Ratio 2:1. (d) Purchases Return ₹ 20,000. It is always observed that short term obligations are paid through current assest. Question 12. And for calculating Security of Return on Debt we calculate Interest Coverage Ratio. XYZ Limited's Inventory is ₹3,00,000. Equity Share Capital ₹ 15,00,000; Gross Profit on Revenue from Operations, i.e., Net Sales `33 1/3`%; Cost Revenue from Operatins or Cost of Goods Sold ₹ 20,00,000; Current Assets ₹ 10,00,000; Current Liabilities ₹ 2,50,000. Following is the Balance Sheet of the Bharati Ltd. as at 31st March, 2019: Surplus, i.e., Balance in Statement of Profit and Loss: Add: Transfer from Statement of Profit and Loss. Ratios simply mean one number expressed in terms of another. (c) Bills Receivable endorsed to a creditor. Solved Accounting Ratios with Balance Sheet(vertical) and Statement of Profit and Loss - Cbse Class 12 … Following formula is used to calculate gross profit ratios. Capital Employed ₹10,00,000; Fixed Assets ₹7,00,000; Current Liablities ₹1,00,000. It is also known as equity ratio or net worth to total assets ratio. (c) Purchase of Stock-in-Trade for cash. Question 4. Current Ratio/Working Capital Ratio: This ratio establish relationship between current assets and current liabilities. 80,000 Total Liquid Assts are ₹12,00,000 and Quick Ratio is 2:1. 2. What do you mean by Ratio Analysis? We can understand from the above mentioned statement in the light of another example where stock contribute the major portion in current assets in that case to find out the liquidity of that firm stock cannot be avoided to measure the liquidity of the firm. This ratio depicts the relationship between amount of profit utilise for paying interest and amount of interest payable. A company had Current Assets of ₹4,50,000 and Current Liabilities of ₹2,00,000. Double Entry Book Keeping- TS Grewal Vol. Shareholders' Funds ₹ 1,60,000; Total Debts ₹ 3,60,000; Current Liabilities ₹ 40,000.Calculate Total Assets to Debt Ratio. (i) Traditional Classification: Traditional ratios are those accounting ratios which are based on the Financial Statement like Trading and Profit and Loss Account and Balance Sheet. NCERT Solution For Class 12 Accountancy Chapter 5 – Accounting Ratios furnishes us with an all-inclusive data to all the concepts. The excess of current assets over current liabilities provides a measure of safety margin available against uncertainty in realisation of current assets and flow of funds. A very high current ratio is not a good sign as it reflects under utilisation or improper utilisation of resources. 6,00,000; Liquid Assets Rs. A and B are sharing profits and losses equally. There are two different ways to measure the liquidity of a firm first through current ratio of the firm and second through quick ratio of the firm. Total Assets ₹22,00,000; Fixed Assets ₹10,00,000; Capital Employed ₹20,00,000. Determine Current Liabilities and Working Capital before and after the payment was made. accounts are converted into sales or cash. Interest Coverage Ratio :This ratio deals only with servicing of return on loan as interest. From the following particulars, determine Trade Receivables Turnover Ratio: Closing Trade Receivables ₹ 1,20,000, Revenue from Operations ₹ 14,40,000. Calculate Debt to Equity Ratio. (iv) Credit Purchase ₹1,60,000. Calculate Operating Ratio. Calculate Trade Receivables Turnover Ratio. Capital Employed ₹ 12,00,000; Net Fixed Assets 8,00,000; Cost of Goods Sold or Cost of Revenue from Operations ₹ 40,00,000; Gross Profit is 20% on Cost. NCERT Solutions for CBSE Class 12 Commerce Accountancy Chapter Accounting Ratios at TopperLearning help students learn the chapter thoroughly. (c) liquid ratio (d) current ratio Answer Inventory Turnover Ratio This ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. We hope the NCERT Solutions for Class 12 Accountancy Part II Chapter 5 Accounting Ratios, help you. (e) goods costing ₹ 10,000 withdrawn for personal use. (ii) Credit Revenue from Operations, i.e., Credit Sales ₹80,000. (a) average payment period (b) inventory turnover (iii) Return on Investment. It paid Current Liabilities of ₹1,00,000 and the Current Ratio became 2:1. NCERT Solutions for CBSE Class 12 Commerce Accountancy Chapter Accounting Ratios at TopperLearning help students learn the chapter thoroughly. (h) Sale of Fixed Assets (Book Value of ₹50,000) for ₹45,000. NCERT Solutions for Class 12 Accountancy Part II Chapter 5 Accounting Ratios. Trade Payables ₹ 50,000, Working Capital ₹ 9,00,000, Current Liabilities ₹ 3,00,000. From the information given below, calculate any three of the following ratio: On the basis of the following information calculate: From the following, calculate (a) Debt to Equity Ratio; (b) Total Assets to Debt Ratio; and (c) Proprietary Ratio: From the following information related to Naveen Ltd., calculate (a) Return on Investment and (b) Total Assets to Debt Ratio:Information: Fixed Assets ₹ 75,00,000; Current Assets ₹ 40,00,000; Current Liabilities ₹ 27,00,000; 12% Debentures ₹ 80,00,000 and Net Profit before Interest, Tax and Dividend ₹ 14,50,000. But on the other hand, in case of those firms where the stock can be easily realised or sold off consideration of stock should be avoided and to measure the liquidity of that firm Quick ratio should be calculated, e.g., the inventories of a service sector company are very liquid as there are no stocks kept for sale, so in that case liquid ratio must be followed for measuring the liquidity of the firm. NCERT Solutions for Class 12 Accountancy Part 2 Chapter 5. State giving reason, which of the following transactions will (a) increase or (b) decrease or (c) not alter the Gross Profit Ratio. On the other hand, insurance company involved in service business and involved in delivering service there is no question of inventory because service is perishable in nature and cannot be stored. In simple words it indicates the number of times average debtors (receivable) are turned over during a year. For calculating the security of debt we calculate Debt-Equity Ratio, Proprietory Ratio, Fixed Assets – Proprietory Fund Ratio, etc. On the basis of accounts of financial statements, the Traditional Classification is further divided into the following categories Get step by step NCERT solutions for Class 12 Accounting Chapter 5 - Accounting Ratios. Question 22. Sometimes quick ratio is calculated on the basis of quick liability instead of current liabilities. (iv) Stock Turnover Ratio (v) Fixed Assets Turnover Ratio. Total Debt ₹12,00,000; Current Liabilities ₹4,00,000; Capital Employed ₹`12,00,000. Chapter 5 of Class 12 Accountancy extensively focuses on explaining the meaning of accounting Ratios, objective and advantages of ratio analysis, limitations of ratio analysis. y Ltd.'s profit after interest and tax was ₹ 1,00,000. The detailed notes by our subject experts help students perform well in the CBSE board exams and competitive exams. Compute Gross Profit Ratio, Working Capitat Turnover Ratio, Dept Equity Ratio and Proprietory Ratio from the fottowing information. (iv) Short Term Creditors: Short term creditors are those creditors who provide financial assistance through short term credit (Generally less than one year). Current Assets ₹ 3,00,000; Current Liabilities ₹ 1,00,000. NCERT Solutions for Class 12th English Vistas These ratios relate to sales or cost of goods sold. If Profit before Interest and Tax is ₹5,00,000 and interest on Long-term Funds is ₹1,00,000, find Interest Coverage Ratio. (b) Bills Payable discharged. Calcltate Liquid Ratio. Get the free view of chapter 3 Accounting Ratios Class 12 extra questions for Class 12 Accountancy - Analysis of Financial Statements and can use Shaalaa.com to keep it handy for your exam preparation. Comment. Answer False, (b) Analyses of data provided in the financial statements a is termed as financial analysis. The average age of inventory is viewed as the average length of time inventory is held by the firm or as the average number of day’s sales in inventory. Ratios can be found out by dividing one number by another number. From the following calculate: (i) Current Ratio; and (ii) Quick Ratio: Calculate Debt to Equity Ratio: Equity Share Capital ₹ 5,00,000; General Reserve ₹ 90,000; Accumulated Profits ₹ 50,000; 10% Debentures ₹ 1,30,000; Current Liabilities ₹ 1,00,000. Balance Sheet had the following amounts as at 31st March, 2019: Calculate ratios indicating the Long-term and the Short-term financial position of the company. Calculate Cost of Revenue from Operations (Cost of Goods Sold). Answer (c) Solvency. From the above formula, it is clear that this ratio reveals the average length of time for which the inventory is held by the firm. The formula for calculating Debtors turnover ratio is as follows, (c)Creditors/Payables Turnover Ratio :It compares creditors with the total credit purchases. (c) average collection period (d) quick ‘ Total liquid assets are Rs. You are able to collect the following information about a company for two years Management is always interested in future growth of the organisation. 20,000. Note :According to the ratio, current asset is less than current liability hence working capital should be negative. A high Interest Coverage Ratio implies that the company can easily meet all its interest obligations out of its profit. Following figures have been extracted from Shivalika Mills Ltd. Calculate Current Ratio. Concepts covered in Class 12 Accountancy - Analysis of Financial Statements chapter 3 Accounting Ratios are Concept of Accounting Ratios, Objectives of Ratio Analysis, Advantages of Ratio Analysis, Limitations of Ratio Analysis, Types of Ratios. (ii) Equity Investors: The prime concern of investors before investing in shares is to ensure the security of their principle and return on investment. (ii) Charging depreciation of ₹25,000 on machinery. NCERT solutions for Class 12 Accountancy - Company Accounts and Analysis of Financial Statements chapter 5 (Accounting Ratios) include all questions with solution and detail explanation. Find out the Current Liabilities. Calculate It signifies the credit period enjoyed by the firm in paying creditors. Calculate Operating Profit Ratio. Same as debtor’s turnover ratio, creditor’s turnover ratio can be calculated in two forms, creditors’ turnover ratio and average payment period. This ratio depicts the relationship between amount of profit utilise for paying interest and amount of interest payable. (a) Customers (b) Stockholders If current assets are quite capable to pay the current liability the liquidity of the concerned firm will be considered good. 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