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Statement Analysis Tools and Accounting Ratios Test - 31

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Statement Analysis Tools and Accounting Ratios Test - 31
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  • Question 1
    1 / -0
    Ratio which comes under liquidity ratios is 
    Solution
    Liquidity ratio includes the following ratios :
    • Current ratio
    • Quick Ratio
    • Cash Ratio
    • Net working capital ratio
  • Question 2
    1 / -0
    Current Assets means........
  • Question 3
    1 / -0
    The use of Debt funds with Equity capital is described as
    (i) Financial leverage
    (ii) Business leverage
    (iii) Trading on equity
  • Question 4
    1 / -0
    Return on capital is computed as ________.
    Solution
    Let Net profit = $$Rs. 120000$$ and Capital = $$Rs. 300000$$
    Then, Return on capital = [Net profit/ Capital] x $$100$$
                                            = [$$120000/300000$$] x $$100$$
                                             = $$40\%$$
  • Question 5
    1 / -0
    Cash in hand is the __________asset.
    Solution
    Quick ratio is the ratio of quick (or liquid) asset to current liabilties. It is expressed as:
                           Quick ratio = Quick Asset/Current Liabilities
    The quick assets are defined as those assets which are quickly convertible into cash. While calculating quick assets we exclude the closing stock and prepaid expenses from the current assets. Because of exclusion liquid current asset, it is considered better than current ratio as a measure of liquidity position of the business. Cash on hand is the most liquid asset. It is also known as "Acid-Test Ratio".
  • Question 6
    1 / -0
     The ability of the business to pay the amount due to stakeholders is calculated by ___________.
    Solution
    Liquidity ratios calculate the ability of the business to pay its due to the stakeholders. Examples of liquidity ratios are Current asset ratio, Quick ratio, Cash ratio and Net working capital ratio
  • Question 7
    1 / -0
    If outside liabilities and owners equity are added we get _________.
  • Question 8
    1 / -0
    From the following details find the current ratio of $$ABC$$Ltd. Cash in hand Rs. $$5000$$, Stock in trade Rs. $$15,000$$, Trade Debtors RS. $$5000$$, Prepaid Expenses A/c Rs. $$3000$$, Plant Rs. $$20,000$$, Miscellaneous expenses to be written off Rs. $$2000$$, Creditors Rs. $$10,000$$, Bills payable Rs. $$3000$$, Outstanding Expenses Rs. $$1000$$, Capital $$30,000$$, Profit and surplus Rs. $$6000$$
  • Question 9
    1 / -0
    Which of these transaction would effect current ratio
  • Question 10
    1 / -0
    Long term assets being Rs. 300000, Current Assets Rs. 80,000, outside liabilities Rs. 120000. Find owners equity.........

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