Statement Analysis Tools and Accounting Ratios Test - 9

Current Ratio will be 2.4 : 1 (1,20,000/50,000)
i.e. Liquid Ratio = 2; it means liquid assets 50,000 x 2 = 1,00,000
Current Assets = 1,00,000 + 20,000 = 1,20,000

Borrowings for more than one year validity can be termed as long term borrowings.  Bank overdraft is meant for a short period and therefore will be treated as current liability.

Profitability ratios are used to assess a business's ability to generate earnings compared to its expenses and other relevant costs incurred during a specific period of time.

Gross Profit is calculated by deducting cost of revenue from operations from Revenue from operations. i.e  Net sale – Cost of goods sold

Operating cost is calculated by adding cost of goods sold and operating expenses. Therefore operating cost - operating expenses = cost of revenue from operations

Source of income from the main activities of business can be termed as revenue.

Employee benefit expenses includes various kinds of non wage compensation provided to employees in addition to their normal wages or salaries

Bad debt expense  represents the amount of uncollectible account receivable that occurs in a given period.

The loss on sale of investment do not from part of operating cost. So will be taken in other expenses

Rent received is not a part of operating income. So will be taking in other incomes