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Practical Problems and Solutions in Accounting Ratios for Class 12 CBSE Board Accountancy

Shivansh Gupta March 29, 2023

I can help you with some practical questions related to Accounting Ratios from the Class 12th CBSE board Accountancy chapter. Here are a few:




1. From the following information, calculate the current ratio, quick ratio and inventory turnover ratio:

  • Current Assets: Rs. 2,00,000
  • Current Liabilities: Rs. 1,00,000
  • Inventories: Rs. 50,000
  • Cost of Goods Sold: Rs. 2,00,000

Solution: 
Current Ratio = Current Assets / Current Liabilities
= Rs. 2,00,000 / Rs. 1,00,000
= 2:1

Quick Ratio = (Current Assets - Inventories) / Current Liabilities
= (Rs. 2,00,000 - Rs. 50,000) / Rs. 1,00,000
= 1.5:1

Inventory Turnover Ratio = Cost of Goods Sold / Inventories
= Rs. 2,00,000 / Rs. 50,000
= 4 times

2. From the following information, calculate the debt-equity ratio, proprietary ratio and interest coverage ratio:

  • Long-term loans: Rs. 1,50,000
  • Share Capital: Rs. 2,00,000
  • Reserves and Surplus: Rs. 1,00,000
  • Net Profit before Interest and Tax: Rs. 1,20,000
  • Interest Paid: Rs. 20,000
Solution: 
Debt-Equity Ratio = Long-term Loans / Shareholders' Funds
= Rs. 1,50,000 / (Rs. 2,00,000 + Rs. 1,00,000)
= 0.5:1

Proprietary Ratio = Shareholders' Funds / Total Assets
= (Rs. 2,00,000 + Rs. 1,00,000) / (Rs. 2,00,000 + Rs. 1,00,000 + Rs. 1,50,000)
= 0.67:1

Interest Coverage Ratio = Net Profit before Interest and Tax / Interest Paid
= Rs. 1,20,000 / Rs. 20,000
= 6 times

 

3. From the following information, calculate the gross profit ratio, net profit ratio and return on investment ratio:

  • Sales: Rs. 10,00,000
  • Cost of Goods Sold: Rs. 7,00,000
  • Operating Expenses: Rs. 1,50,000
  • Net Profit after Tax: Rs. 80,000
  • Fixed Assets: Rs. 5,00,000
  • Current Assets: Rs. 2,00,000
  • Current Liabilities: Rs. 1,00,000
Solution:
Gross Profit Ratio = (Gross Profit / Sales) x 100
= [(Sales - Cost of Goods Sold) / Sales] x 100
= [(Rs. 10,00,000 - Rs. 7,00,000) / Rs. 10,00,000] x 100
= 30%

Net Profit Ratio = (Net Profit after Tax / Sales) x 100
= (Rs. 80,000 / Rs. 10,00,000) x 100
= 8%

Return on Investment Ratio = (Net Profit after Tax / Total Assets) x 100
= (Rs. 80,000 / Rs. 7,00,000) x 100
= 11.43%

4. From the following information, calculate the debtors turnover ratio and average collection period:

  • Sales: Rs. 5,00,000
  • Debtors: Rs. 60,000
  • Credit Sales: Rs. 1,00,000
Solution: 
Debtors Turnover Ratio = Credit Sales / Debtors
= Rs. 1,00,000 / Rs. 60,000
= 1.67 times

Average Collection Period = 365 days / Debtors Turnover Ratio
= 365 days / 1.67 times
= 219 days (approx.)

5. From the following information, calculate the price earnings ratio and earnings per share:

  • Net Profit after Tax: Rs. 1,00,000
  • Number of Equity Shares: 50,000
  • Market Price per Share: Rs. 50
Solution:
Price Earnings Ratio = Market Price per Share / Earnings per Share
= Rs. 50 / (Rs. 1,00,000 / 50,000)
= Rs. 50 / Rs. 2
= 25 times

Earnings per Share = Net Profit after Tax / Number of Equity Shares
= Rs. 1,00,000 / 50,000
= Rs. 2 per share

I hope these solutions help you in understanding the practical application of Accounting Ratios.


Class 12, CBSE board, Accountancy, Accounting ratios, practical questions, solutions.


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