8 Accounting Ratios

This is a profitability ratio that deals with relationship between net profit after tax and net sales. Ideal ratios can be established and the relationships between primary ratios may be.

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Profitability ratios include return on owners equity payout ratio return on assets return on sales.

8 accounting ratios. Trade Payable Turnover Ra. 21 is considered as best but it should not be more than this. Common accounting ratios include the debt-to-equity ratio the quick ratio the dividend payout ratio gross margin and operating margin.

It is calculated by dividing the net profit after tax by net sales. A high-profit margin indicates that an entity spends less than a competitor on the direct cost of products or services. Total Assets To Debt Ratio Total Assets Debts or Long Liabilities.

A Inventory turnover and Current ratio B Current ratio and Quick ratio C Gross Profit ratio and Operating ratio D Current ratio and. Hence interest Profit before tax 2 Rs 12000012 Rs 60000. Solution of Question Number 8 of Accounting Ratios Chapter of TS Grewal Book 2021-22 Class 12.

Ratio 8 Earnings per share. This ratio is termed as gross profit ratio. Accounting ratios are one of the important tools of financial statement analysis.

Class 12 Accounting Ratio Lec-8 Content Involved1. 153 for every 1Re of current liability while in the year 2012 the current asset was Rs 154 Re of its current liability while in the year. Current liabilities Current liabilities You should note that this ratio is not expressed as a percentage.

Again taking the example of Joe Kovers business we can state his current ratio as. This ratio establishes relationship between the cost of goods sold during a given period and the average amount of inventory carried during that period. 400000 10 Gross Loss Rs.

The gross margin ratio is calculating by dividing gross profit over sales of the period. 81 Inventory Turnover Ratio 811 Inventory Turnover Ratio Relationship between the Cost of Goods Sold and Average Inventory. 10000 and the Revenue from Operations are Rs.

Current Ratio Interpretation From the calculation of the current ratio it is evident that the companys current ratio for the year 2010 is 1301 2011 is 1801 2012 is 1541 and 2013 is a 1531 that is companys current assets in year 2013 was Rs. Two basic measures of liquidity are. Working Note-Calculation of Gross Loss-Revenue from Operations Rs.

Profit before tax 2 times interest. About Press Copyright Contact us Creators Advertise Developers Terms Privacy Policy Safety How YouTube works Test new features. Accounting Ratios It is a mathematical expression that shows the relationship between various items or groups of items shown in financial statements.

100000 it can be said that the gross profit is 10 10000 100 100000 of the Revenue from Operations. Question number 8 of the Accounting Ratios chapter is a practical one. Liquidity Current ratio also known as the working capital ratio The formula for calculating this ratio is Current assets OR Current assets.

Ratio 2 Current ratio. Further such ratios are expressed either as a fraction percentage proportion or number of times. When ratios are calculated on the basis of accounting information they are called accounting ratios.

Ix Gross profit is 12 times the difference between debtors and stock. Calculation of Cost of Revenue from Operations-Cost of Revenue from Operations Revenue from Operations Gross Loss. Accounting Ratios Class 12 Accountancy MCQs Pdf.

Accounting ratios may be very useful for forecasting likely events in the future since past ratios indicate trends in costs sales profit and other relevant facts. Financial ratios using income statement amounts. Ratio 4 Debt to equity ratio.

These showcase a relationship between two or more accounting numbers that are taken from the financial statements. Working Capital Turnover Ratio. Ratio 1 Working capital.

Multiple Choice Questions Select the best alternate and check your answer with the answers given at the end of the book. Ratio 3 Quick acid test ratio. Total Assets to Debt Ratio.

Here is the solution to it. For example if the gross profit of the business is Rs. The current ratio provides a better measure of overall liquidity only when a firms inventory cannot easily be converted into cash.

Trade Receviable Turnover Ratio4. Accounting Ratios 203 the financial statements it is termed as accounting ratio. Creditors Turnover Ratio.

400000 Gross Loss Rs. So the Inventory Turnover Ratio is 8 times. Solvency ratios include debt to total asset and interest coverage.

Financial ratios using balance sheet amounts. Ratio 5 Debt to total assets. A Liquidity Ratios 1.

Liquidity ratios include current ratio quick asset ratio and inventory turnover. Ratio 6 Gross margin gross profit percentage Ratio 7 Profit margin. Ratio Analysis It is a technique which involves re-grouping of data by application of arithmetical relationship.

Profit before interest and tax 3 x Rs 60000 Rs 180000. Inventory Turnover Ratio 8 times. Hence gross profit 12 x.

It shows the relationship between Total Assets and Debts.

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