Please refer to Chapter 5 Accounting Ratios MCQ Class 12 Accountancy with answers below. These multiple-choice questions have been prepared based on the latest NCERT book for Class 12 Accountancy. Students should refer to MCQ Questions for Class 12 Accountancy with Answers to score more marks in Grade 12 Accountancy exams. Students should read the chapter Accounting Ratios and then attempt the following objective questions.

MCQ Questions Class 12 Accountancy Chapter 5 Accounting Ratios

Accounting Ratios MCQ Class 12 Accountancy provided below covers all important topics given in this chapter. These MCQs will help you to properly prepare for exams.

Accounting Ratios MCQs Class 12 is great for preparing for CBSE board examinations. CBSE Class 12 Accountancy Syllabus is much bigger and requires concentrated efforts on the part of the student to face the examinations and pop out a success. MCQ of Accounting Ratios Class 12 pdf consists of details for all chapters from the subjects. Each question has four choices with answers. Firstly, Solve all these Questions and check your answer with the right answer. If your answers are not correct, Don’t hesitate to try again because You need to make preparation daily to score higher marks in the Class 12 Exam.

Question: Liquid ratio is also known as
(a) Test Ratio
(b) Quick Ratio
(c) Quick Ratio and Test Ratio
(d) None of the options

Question: Liquid Ratio is
(a) Liquid Assets or Quick Assets/Current Liabilities
(b) Liquid Assets or Quick Assets+Current Liabilities
(c) Liquid Assets or Quick Assets-Current Liabilities
(d) None of the options

Question: Sincere Ltd. has a Proprietary Ratio of 25%. To maintain this ratio at 30%, management may ~
(a) increase Equity
(b) Reduce Debt
(c) Either Increase Equity or Reduce Debt
(d) Increase Current Assets

Question: From the following, which ratio is not a part of Profitability Ratio:
(a) Proprietary Ratio
(b) Gross Profit Ratio
(c) Operating Ratio
(d) Net Profit Ratio

Question: Which ratio is considered as safe margin of solvency?
(a) Current Account
(b) Liquid ratio
(c) Current ratio
(d) None of the options

Question: Current ratio is stated as a crude ratio because
(a) It measures only the quality of current assets
(b) It measures only the quantity of current assets
(c) It measures only the quantity of current assets and It measures only the quality of current assets
(d) None of the options

Question: Liquid ratio is also known as
(a) Acid test ratio
(b) Quick ratio
(c) Quick ratio and Acid test ratio
(d) None of the options

Question: Debt-equity ratio is a sub-part of
(a) Short-term solvency ratio
(b) Debtors turnover ratio
(c) Long-term solvency ratio
(d) None of the options

Question: Liquid assets is determined by
(a) Current assets +Prepaid expenses
(b) Current assets +stock+ prepaid expenses
(c) Current assets-stock-Prepaid expenses
(d) None of the options

Question: Current Assets do not include :
(a) Prepaid Expenses
(b) Inventory
(c) Goodwill
(d) Bills Receivable

Question: Quick Ratio is also known as :
(a) Liquid Ratio
(b) Current Ratio
(c) Working Capital Ratio
(d) None of the Above

Question: Current assets include only those assets which are expected to be realized within……
(a) 3 months
(b) 6 months
(c) 1 year
(d) 2 years

Question: The definition, “The term accounting ratio is used to describe significant relationship which exist between figures shown in a balance sheet, in a profit and loss account, in a budgetary control system or in a any part of the accounting organization” is given by
(a) Biramn and Dribin
(b) Lord Keynes
(c) J. Betty
(d) None of the above

Question: Higher the ratio, the more favourable it is, doesn t stands true for
(a) Operating ratio
(b) Liquidity ratio
(c) Net profit ratio
(d) Stock turnover ratio

Question: The most precise test of liquidity is
(a) Current ratio
(b) Quick ratio
(c) Absolute Liquid ratio
(d) None of the options

Question: The two basic measures of operational efficiency of a company are
(a) Inventory Turnover Ratio and Working Capital Turnover Ratio
(b) Liquid Ratio and Operating Ratio
(c) Liquid Ratio and Current Ratio
(d) Gross Profit Margin and Net Profit Margin

Question: Quick Assets do not include
(a) Cash in hand
(b) Prepaid Expenses
(c) Marketable Securities
(d) Trade Receivables

Question: Ratio Analysis is a tool to measure the
(a) Profit status
(b) Financial Status
(c) Loss Status
(d) None of the options

Question: When ratios are calculated on the basis of accounting information, they are called
(a) Working Capital Ratio
(b) Accounting ratios
(c) Profit ratio
(d) None of the options

Question: Gross profit ratio is also termed as:
(a) Operating ratio
(b) Operating profit ratio
(c) Gross margin ratio
(d) Net profit ratio

Question: Current assets are those assets which are convertible into cash within:
(a) One month
(b) 6 months
(c) 12 months
(d) none of these

Question: Objectives of Ratio Analysis
(a) Helpful in comparative analysis of the performance
(b) To know the areas of an enterprise which need more attention
(c) To know about the potential areas which can be improved on
(d) All of the options

Question: Ratio Analysis helpful in
(a) Comparative analysis of the performance and Budgeting and forecasting
(b) Comparative analysis of the performance
(c) Budgeting and forecasting
(d) None of the options

Question: Parties interested in financial analysis are :
(a) Investors
(b) Government
(c) Financial institutions
(d) All of the above

Question: Debt equity ratio is:
(a) Short term solvency ratio
(b) Long term solvency ratio
(c) Liquidity ratio
(d) Profitability ratio

Question: Ratio Analysis provide analysis of the
(a) Profitability
(b) Solvency
(c) Liquidity
(d) None of the options

Question: Current Ratio is :
(a) Liquid Assets/Current Assets
(b) Fixed Assets/Current Assets
(c) Current Assets/Current Liabilities
(d) Liquid assets/Current Liabilities

Question: Working Capital is the :
(a) Cash and Bank Balance
(b) Capital borrowed from Banks
(c) Difference between Current Assets and Current Liabilities
(d) Difference between Current Assets and Fixed assets

Question: An accounting ratio is a
(a) Logical expression
(b) Mathematical expression
(c) Mathematical expression and Logical expression
(d) None of the options

Question: Accounting ratios classified as under
(a) Solvency Ratios
(b) Liquidity Ratios
(c) Current ratio
(d) All of the options

Question: Which Items Included in Current Assets for get the current ratio
(a) Short-term provisions
(b) Short-term borrowings
(c) Cash balance
(d) All of the options

Question: Which ratios judge the long-term financial position of an enterprise
(a) Solvency Ratios
(b) Quick Ratio
(c) Test Ratio
(d) None of the options

Question: Establishes the relationship between long-term debt (external equities) and the equity (internal equities)
(a) Debt to Equity ratio
(b) Quick Ratio
(c) Test Ratio
(d) None of the options

Question: Liquid Assets do not include:
(a) Bills Receivable
(b) Debtors
(c) Inventory
(d) Bank Balance

Question: Ideal Current Ratio is:
(a) 1:1
(b) 1:2
(c) 1:3
(d) 2:1

Question: Debt to Equity ratio establishes the relationship between
(a) long-term debt (external equities) and the current Assets(internal equities)
(b) long-term debt (external equities) and the equity (internal equities)
(c) long-term debt (external equities) and the equity (internal equities) and long-term debt (external equities) and the current Assets(internal equities)
(d) None of the options

Question: Current Ratio is :
(a) Liquid Assets/Current Assets
(b) Fixed Assets/Current Assets
(c) Current Assets/Current Liabilities
(d) Liquid Assets/Current Liabilities

Question: Debt to Equity Ratio is
(a) Debt (Long-term external equities)+Equity (Shareholders funds)
(b) Debt (Long-term external equities)-Equity (Shareholders funds)
(c) Debt (Long-term external equities)+Equity (Shareholders funds) and Debt (Long-term external equities)-Equity (Shareholders funds)
(d) None of the options

Question: Cash Balance Rs.5,000; Trade Payables Rs.40,000; Inventory Rs.50,000; Trade Receivables Rs.65,000 and Prepaid Expenses are Rs. 10,000. Liquid Ratio will be
(a) 1.75 : 1
(b) 2 : 1
(c) 3.25 : 1
(d) 3 : 1

Question: Current Assets Rs.4,00,000; Current Liabilities Rs.2,00,000 and Inventory is Rs.50,000. Liquid Ratio will be :
(a) 2 : 1
(b) 2.25 : 1
(c) 4 : 7
(d) 1.75 : 1

Question: Which of the following transactions will improve the Current Ratio :
(a) Cash Collected from Trade Receivables
(b) Purchase of goods for cash
(c) Payment to Trade Payables
(d) Credit purchase of Goods

Question: Items Included in Liquid/Quick Assets
(a) Cash and cash equivalents
(b) Items Included in Liquid/Quick Assets
(c) Trade receivables
(d) All of the options

Question: Items excluded in liquid assets are
(a) Prepaid expenses
(b) Inventories
(c) Inventories and prepaid expenses
(d) None of the options

Question: Current Assets Rs.85,000; Inventory Rs.22,000; Prepaid Expenses Rs.3,000. Then liquid assets will be :
(a) Rs.63,000
(b) 60,000
(c) X 82,000
(d) X 1,10,000

Question: Operating ratio is :
(a) Cost of revenue from operations + Selling Expenses/Net revenue from operations
(b) Cost of production + Operating Expenses/Net revenue from operations
(c) Cost of revenue from operations + Operating Expenses/Net Revenue from Operations
(d) Cost of Production/Net revenue from operations

Question: Current ratio is also known as
(a) Working capital ratio
(b) Profit Sharing Ratio
(c) Working capital ratio and Profit Sharing Ratio
(d) None of the options

Question: Which Ratio establishes relationship between current assets and current liabilities
(a) Solvency Ratios
(b) Liquidity Ratios
(c) Current ratio
(d) None of the options

Question: Two basic measures of liquidity are :
(a) Inventory turnover and Current ratio
(b) Current ratio and Quick ratio
(c) Gross Profit ratio and Operating ratio
(d) Current ratio and Average Collection period

Question: Advantages of Ratio Analysis
(a) Better understand financial numbers
(b) It is useful in analysis of key financial figures
(c) It is useful in analysis of financial statements
(d) All of the options

Question: Limitations of Ratio Analysis
(a) Ratios are affected by window-dressing
(b) Accounting ratios ignore qualitative factors
(c) Absence of universally accepted terminology
(d) All of the options

Question: Current Ratio is :
(a) Solvency Ratio
(b) Liquidity Ratio
(c) Activity Ratio
(d) Profitability Ratio

Question: Debt Equity Ratio is :
(a) Liquidity Ratio
(b) Solvency Ratio
(c) Activity Ratio
(d) Operating Ratio

Question: Collection of debtors
(a) Has no effect on current ratio
(b) Increases current ratio
(c) Decreases current ratio
(d) None of the options

Question: In ABC analysis A class consist of items having
(a) Accurate records
(b) Good records
(c) Minimal records
(d) No records

Question: Ratio Analysis provide information useful for
(a) Share holders
(b) Preparing the plans for future
(c) Debentures holder
(d) None of the options

Question: Ratio Analysis affected by
(a) Ability of the analyst
(b) Window-dressing
(c) Personal bias
(d) All of the options

Question: lf Current Ratio ofa firm is 2.5 :1 and its Current Liabilities are ,00,000. Its Working Capital will be
(a) 3,00,000
(b) 3,75,000
(c) 11,00,000
(d) 7,00,000

Question: From the following information, calculate Proprietary Ratio: Share Capital 5,00,000, Non- current Assets 22,00,000, Reserves and Surplus 3,00,000, Current Assets 10,00,000.
(a) 100%
(b) 70%
(c) 40%
(d) 25%

Question: Ratio Analysis Price level changes
(a) Ignored
(b) Noticed
(c) Ignored and Noticed
(d) None of the options

Question: Ratio Analysis ignored
(a) Quantity Factors
(b) Qualitative factors
(c) Qualitative factors and Quantity Factors
(d) None of the options

Question: Debt Equity Ratio is :
(a) Long Term Debts/Shareholder’s Funds
(b) Short Term Debts/Equity Capital
(c) Total Assets/Long term Debts
(d) Shareholder’s Funds/Total Assets

Question: Proprietary Ratio is :
(a) Long term Debts/Shareholder’s Funds
(b) Total Assets/Shareholder’s Funds
(c) Shareholder’s Funds/Total Assets
(d) Shareholder’s Funds/Fixed Assets

Question: Which of the following is not a limitation of analysis of financial statements?
(a) Affected by personal basis
(b) To know the financial strength
(c) Lack of qualitative analysis
(d) Based on accounting concepts

Question: What is trade investment?
(a) Trading in securities
(b) Investment in his own business
(c) Investment in other company for promotion of his own business
(d) None of the above 

Question: Current ratio is:
(a) Solvency Ratio
(b) Liquidity ratio
(c) Activity Ratio
(d) Profitability Ratio

Question: Accounting ratios are an important tool of
(a) Financial statement analysis
(b) Trial Balance
(c) Financial statement analysis and Trial Balance
(d) None of the options

Question: When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as
(a) Accounting ratio
(b) Financial ratio
(c) Costing ratio
(d) None of the options

Question: Which of the following ratio measures short term solvency?
(a) Liquidity ratios
(b) Solvency ratios
(c) Activity ratios
(d) Profitability ratios

Question: Current Ratio is
(a) Current Assets/Current Liabilities
(b) Current Assets-Current Liabilities
(c) Current Assets x Current Liabilities
(d) None of the options

Question: Which Items Included in Current Assets for get the current ratio
(a) Trade receivables (bills receivable and sundry debtors less provision for doubtful debts)
(b) Current investments
(c) Current Stock
(d) All of the options

Question: Long term solvency ratio is judged by which of the following ratio?
(a) Debt equity ratio
(b) Total assets turnover ratio
(c) Liquidity ratios
(d) Operating ratio

Question: In the Balance sheet of a firm, the debt equity ratio is 2:1.The amount of long term sources is Rs.12 lac. What is the amount of tangible net worth of the firm?
(a) Rs.8 lakh
(b) Rs.6 lakh
(c) Rs.4 lakh
(d) None of the options

Question: Accounting Ratios are mathematical expression of the relationship between
(a) Two Debtors
(b) Two Shareholders
(c) Two Accounting Figures
(d) None of the options

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