# Statement Analysis Tools and Accounting Ratios Class 12 Accountancy Extra Questions

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Statement Analysis Tools and Accounting Ratios Class 12 Accountancy Extra Questions. myCBSEguide has just released Chapter Wise Question Answers for class 12 Accountancy. There chapter wise Practice Questions with complete solutions are available for download in myCBSEguide website and mobile app. These test papers with solution are prepared by our team of expert teachers who are teaching grade in CBSE schools for years. There are around 4-5 set of solved Accountancy Extra questions from each and every chapter. The students will not miss any concept in these Chapter wise question that are specially designed to tackle Exam. We have taken care of every single concept given in CBSE Class 12 Accountancy syllabus and questions are framed as per the latest marking scheme and blue print issued by CBSE for class 12.

CBSE Class 12 Accountancy Extra Questions

## Accountancy Important Questions of Class 12

Ch-10 Statement Analysis Tools and Accounting Ratios

1. Operating cost – Operating Expenses = ?
1. Net Profit
2. Operating Profit
3. Cost of Revenue from Operations
4. Gross Profit
2. Debt Equity Ratio is expressed in ______
1. Percentage
2. Fraction
3. Time
4. None of these
3. Which of the following is a liquidity ratio?
1. Quick ratio
2. Inventory turnover
3. P/E- ratio
4. Equity multiplier
4. Current Liabilities are not required to calculate the ……..
1. Current Ratio
2. Quick Ratio
3. Both Current Ratio and Quick Ratio
4. Interest Coverage Ratio
5. Followings are the solvency ratio except
1. Quick Ratio
2. Proprietary Ratio
3. Debt equity ratio
4. Total Assets to Debt Ratio
6. 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%

7. Opening Stock Rs. 29,000; Closing Stock Rs. 31,000; Sales Rs. 3,20,000; Gross Profit Ratio 25% on sales. Calculate

1. Inventory Turnover Ratio
2. Average Age of Inventory.
8. Calculate ‘Gross Profit Ratio’ from the following information:

 Rs. Net Revenue from Operations 80,000 Cost of Revenue from Operations 60,000 Operating Expenses 10,000 Indirect Expenses 60,000
9. In case a bill receivable is dishonoured, elucidate whether this ratio will improve, decline or will have no change if the current ratio is 2: 1.

10. What do Solvency Ratios indicate?

11. From the following information, calculate any two of the following ratios

1. Current ratio
2. Inventory Turnover ratio
3. Debt equity ratio

Information

Revenue from operations (Net sales) Rs. 5,00,000, opening inventory Rs. 7,000, closing inventory Rs. 4,000 more than the opening inventory, net purchase Rs. 1,00,000 less than revenue from operations, operating expenses Rs. 30,000, liquid assets Rs. 75,000, prepaid expenses Rs. 2,000, current liabilities Rs. 60,000, 9% debentures Rs. 3,00,000, long-term loan from bank Rs. 1.00,000, equity share capital Rs. 10,00,000 and 8% preference share capital Rs. 2,00,000.

12. The proprietary ratio of M Ltd is 0.80 : 1. State with reasons whether the following transactions will increase, decrease or not change the proprietary ratio.

1. Obtained a loan from bank Rs. 2,00,000 payable after five years.
2. Purchased machinery for cash Rs. 75,000
3. Redeemed 5% redeemable preference shares Rs. 1,00,000.
4. Issued equity shares to the vendors of machinery purchased for Rs. 4,00,000.
1. The quick ratio of a company is 1.5 : 1. State with reason which of the following transactions would (a) increase (b) decrease or (c) not change the ratio
1. Paid rent Rs. 3,000 in advance.
2. Trade receivables included a debtor Shri Ashok who paid his entire amount due Rs. 9,700.
2. From the following information compute ‘proprietary ratio’.
 Information Amt (Rs.) Long-term borrowings 2,00,000 Long-term provisions 1,00,000 Current liabilities 50,000 Non-current assets 3,60,000 Current assets 90,000
13. Following information is extracted from the statement of profit and loss of gold coin Ltd. for the year ended 31st March, 2015:

 Particulars 31st March 2015 31st March 2014 Revenue from operations Rs. 60,00,000 Rs. 45,00,000 Employee benefit expenses Rs. 30,00,000 Rs. 22,50,000 Depreciation Rs. 7,50,000 Rs. 6,00,000 Other expenses Rs. 15,50,000 Rs. 10,00,000 Tax rate 30% 30%

Prepare a comparative statement of profit and loss.

Ch-10 Statement Analysis Tools and Accounting Ratios

1. Cost of Revenue from Operations, Explanation: Operating cost is calculated by adding cost of goods sold and operating expenses. Therefore operating cost – operating expenses = cost of revenue from operations
1. Fraction, Explanation: Debt Equity Ratio is expressed in Fraction, the formula will be debt/ equity
1. Quick ratio, Explanation: Quick Ratio is also known as liquid ratio. Formula: Liquid Assets/ Current Liabilities
1. Interest Coverage Ratio, Explanation: Interest coverage ratio is calculated by dividing a company’s earnings before interest and taxes by the company’s interest expenses for the same period.
1. Quick Ratio, Explanation: Solvency ratios indicates the company’s ability to meet long term debts while quick ratio indicates the company’s ability to meet short term debts.
1. Interest Coverage Ratio {tex}= \frac{{{\rm{Net Profit before Interest \Tax}}}}{{{\rm{Interest on Long Term Debt}}}}{/tex}Interest Coverage Ratio = {tex}\frac { R s .2,20,000 (W.N.)} { R s .20,000 }{/tex}= 11 Times Working Note :Calculation of Net Profit Before Interest And Tax :
 Profit After Tax = 1,00,000 (+)Tax (50% of Profit before Tax) = 1,00,000 Profit before Tax = 2,00,000 (+)Interest = 20,000 Profit before Interest and Tax = 2,20,000
2. Inventory Turnover Ratio ={tex}\frac { \text { Cost of Sales } } { \text { Average Stock } } = \frac { 2,40,000 } { 30,000 }{/tex}= 8 times
Cost of Sales = Sales – Gross Profit
= Rs. 3,20,000 – 25% of 3,20,000
=Rs. 3,20,000 – 80,000
= Rs. 2,40,000
Average Stock ={tex}\frac { 29,000 + 31,000 } { 2 }{/tex}= Rs. 30,000
Average Age of Inventory= {tex}\frac { 365 } { \text { Inventory Turnover Ratio } } = \frac { 365 } { 8 }{/tex}= 46 days.
3. Gross Profit Ratio = {tex}\frac { \text {Gross Profit} } { \text { Net Sales /Net Revenue from Operations } } \times 100{/tex}Gross profit= Rs. 80,000 – 60,000 = Rs. 20,000(20000/80000 × 100) = 25%
4. No change. In case a bill receivable is dishonoured, the current ratio will have no change because it would not affect either, assets or current liabilities. Because bills receivable decreases and debtors increase by the same amount. To calculate the ratio, analysts compare a company’s current assets to its current liabilities.
5. Solvency Ratios are calculated to judge the long-term solvency of the business. It indicates the ability of a business firm to meet its long term liabilities. It is calculated by dividing a company’s cash flow or after-tax net operating income by its total debt obligations.
6. (i)For Current Ratio first there is a need to find the value of current assets than calculated as follows:-Current Ratio {tex}= \frac { \text { Current Assets } } { \text { Current Liabilities } }{/tex}
{tex}= \frac { 88,000 } { 60,000 } = 1.47 : 1{/tex}
*Current Assets = Liquid Assets + Closing Inventory ** + Prepaid Expenses
= 75,000 + 11,000 + 2,000
= Rs. 88,000
**Closing Inventory = Opening Inventory + 4,000
= 7,000 + 4,000
= Rs. 11,000(ii)For Inventory Turnover Ratio first there is a need to find the value of Cost of goods sold & Average Inventory both than calculated as follows:-Inventory Turnover Ratio {tex}= \frac { \text { Cost of Revenue from Operations (Cost of goods sold) } } { \text { Average inventory } }{/tex}
{tex}= \frac { 3,96,000 } { 9,000 } = 44{/tex} times.
*Cost of Revenue from Operations = Opening Inventory + Net Purchases – Closing Inventory
= 7,000 + (5,00,000 – 1,00,000) – 11,000 = Rs. 3,96,000
**Average Inventory {tex}= \frac { \text { Opening Inventory } + \text { Closing Inventory } } { 2 }{/tex}
{tex}= \frac { 7,000 + 11,000 } { 2 } = Rs. 9,000{/tex}(iii)For Debt Equity Ratio first there is a need to find the value of Debt & Equity both than calculated as follows:-Debt Equity Ratio {tex}= \frac { \text { Debt } } { { Equity } } or \frac { \text { Long-term Debts or Loans } } { \text { Shareholders’ Funds} }{/tex}{tex}= \frac { 4,00,000 } { 12,00,000 } = 0.33 : 1{/tex}
*Long-term Debts = 9% Debentures + Long-term Loan from Bank
= 3,00,000 + 1,00,000 = Rs. 4,00,000
**Shareholders’ Funds = Equity Share Capital + Preference Share Capital
= 10,00,000 + 2,00,000 = Rs. 12,00,000
1. Decrease: Loan obtained from bank will increase the total assets but the shareholders’ funds will remain the same, so proprietary ratio will decrease.
2. No change: Machinery purchased for cash will increase the total assets and simultaneously decrease the total assets, therefore proprietary ratio will remain unchanged.
3. Decrease: Redemption of preference shares will decrease total assets and shareholders’ funds simultaneously, so proprietary ratio will decrease.
4. Increase: Machinery purchased by issue of equity shares will increase total assets and shareholders’ funds simultaneously, so proprietary ratio will increase.

Proprietory ratio establishes the relationship between proprietors funds and total assets. This ratio is computed as follows:

Proprietory ratio= {tex}\frac{Proprietor’s\;Funds\;or\;shareholder’s\;funds}{Total\;assets}{/Tex}

Proprietors funds = Liabilities Approach: Share capital + Reserves and Surplus

1. Rent paid in advance is a current asset not quick assets therefore, cash is only going to reduce so will the quick assets and it will also bring reduction in quick ratio.
2. No change will be seen in the ratio
Reason: because there is a simultaneous increase and decrease in current assets by the same amount i.e. cash and trade receivables amounting to rupees 9700. Therefore current assets will be unaffected.
1. Proprietary Ratio = (shareholders fund /Total assets) =(100000/450000) 0.22: 1
Working notes: Calculation of Shareholders’ Funds
 By Assets Approach Amt (Rs.) Non-current Assets 3,60,000 Current Asset 90,000 Total Assets 4,50,000 (-) Current Liabilities (50,000) (-) Long-term Borrowings (2,00,000) (-) Long-term Provisions (1,00,000) Shareholders’ Funds Rs. 1,00,000
• Comparative statement of Profit and Loss

 Particulars Note No. 31.03.14 31.03.15 Absolute change Percentage change Rs. Rs. Rs. % (A) (B) (C) = (B-A) (D) = (C/A) x 100 I. Revenue from operation 45,00,000 60,00,000 15,00,000 33.33% II. Expenses: Employee benefit expense 22,50,000 30,00,000 7,50,000 33.33% Depreciation 6,00,000 7,50,000 1,50,000 25% Other expenses 10,00,000 15,50,000 5,50,000 55% Total 38,50,000 53,00,000 14,50,000 37.66% III. Profit before Tax (I-II) 6,50,000 7,00,000 50,000 7.69% Less : Tax (30%) 1,95,000 2,10,000 15,000 7.69% IV. Profit after tax (III-IV) 4,55,000 4,90,000 35,000 7.6%