Unit 9: Ratio Analysis — Online MCQ Test
ACCOUNTANCY · CLASS 12th · Tamil Nadu State Board
Practice Unit 9: Ratio Analysis with a free chapter-wise online MCQ test.
This chapter covers: Extending financial analysis this unit covers mathematical ratios used to evaluate business performance. Students master the calculation and interpretation of liquidity ratios (Cur....
AI-generated questions from basic to board-exam level, with instant results and explanations.
Unit 9: Ratio Analysis — Important Questions & Answers
Which ratio measures the ability of a business to meet its short-term obligations with its current assets?
- A. Debt-Equity Ratio
- B. Current Ratio
- C. Gross Profit Ratio
- D. Return on Investment
Answer: B. Current Ratio
The current ratio compares current assets with current liabilities to judge short-term solvency. It shows whether the business can pay its current dues.
The current ratio compares current assets with current liabilities to judge short-term solvency. It shows whether the business can pay its current dues.
The formula for Quick Ratio is:
- A. Current Assets / Current Liabilities
- B. Liquid Assets / Current Liabilities
- C. Fixed Assets / Current Liabilities
- D. Inventory / Current Liabilities
Answer: B. Liquid Assets / Current Liabilities
Quick ratio is calculated by dividing liquid assets by current liabilities. It excludes inventory and prepaid expenses because they are not immediately convertible into cash.
Quick ratio is calculated by dividing liquid assets by current liabilities. It excludes inventory and prepaid expenses because they are not immediately convertible into cash.
If current assets are ₹2,40,000 and current liabilities are ₹1,20,000, what is the Current Ratio?
- A. 1:2
- B. 2:1
- C. 3:1
- D. 4:1
Answer: B. 2:1
Current ratio = Current Assets / Current Liabilities = 2,40,000 / 1,20,000 = 2. This is written as 2:1.
Current ratio = Current Assets / Current Liabilities = 2,40,000 / 1,20,000 = 2. This is written as 2:1.
A firm has current assets of ₹4,50,000, inventory of ₹1,50,000, and current liabilities of ₹2,00,000. Which statement is correct?
- A. Current Ratio is 2.25:1 and Quick Ratio is 1.5:1
- B. Current Ratio is 2:1 and Quick Ratio is 1:1
- C. Current Ratio is 1.5:1 and Quick Ratio is 2.25:1
- D. Current Ratio is 3:1 and Quick Ratio is 0.75:1
Answer: A. Current Ratio is 2.25:1 and Quick Ratio is 1.5:1
Current ratio = 4,50,000 / 2,00,000 = 2.25:1. Quick assets = 4,50,000 - 1,50,000 = 3,00,000, so quick ratio = 3,00,000 / 2,00,000 = 1.5:1.
Current ratio = 4,50,000 / 2,00,000 = 2.25:1. Quick assets = 4,50,000 - 1,50,000 = 3,00,000, so quick ratio = 3,00,000 / 2,00,000 = 1.5:1.
Which ratio is most directly affected if a business reduces credit sales while keeping debtors unchanged for some time?
- A. Debtors Turnover Ratio
- B. Current Ratio
- C. Proprietary Ratio
- D. Debt-Equity Ratio
Answer: A. Debtors Turnover Ratio
Debtors turnover ratio depends on credit sales and average debtors. If credit sales fall, the ratio is likely to decrease unless debtors also change proportionately.
Debtors turnover ratio depends on credit sales and average debtors. If credit sales fall, the ratio is likely to decrease unless debtors also change proportionately.