🏫 Board📒 Accountancy

Accounting Ratios

11 Board Accountancy previous year questions on Accounting Ratios — options free on every question; 1 include the answer & explanation free, the rest unlock with PYQ Pass.

Q1 FREE PREVIEW

Ideal current ratio is

1:1

1:2

5:2

2:1

✓ Correct answer: d)

2:1

Explanation

Correct Answer: D) 2 : 1

Why this option is correct?

Current Ratio shows the relationship between Current Assets and Current Liabilities.
The generally accepted ideal ratio is 2 : 1, which means the firm should have
₹2 of current assets for every ₹1 of current liability.
This provides a reasonable margin of safety to meet short-term obligations.
Hence, option D is correct.

Why other options are wrong?

A) 1 : 1
1:1 is the ideal Liquid (Quick) Ratio, not the Current Ratio.

B) 1 : 2
This means current assets are less than current liabilities, showing poor liquidity.

C) 5 : 2
Though better than 1:1, this is not the standard or ideal ratio accepted in practice.

Current assets include

Debtors and Bills Receivable

Bank Balance and Cash in Hand

Prepaid Expenses and Stock

All of these

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Profitability Ratio is generally shown in :-

Simple Ratio

Percentage

Times

None of these

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Aradya Ltd. had debt equity ratio of 2.5: 1. State which of the following transaction will not effect the Debt Equity Ratio :

Purchase of ₹ 15,00,000 machinery by taking bank loan of ₹ 12,00,000

₹ 2,00,000 paid to creditors

Conversion of ₹ 1,00,000 debentures into Equity shares of ₹ 100 each

Sale of furniture (book value of ₹ 5,00,000 ) for ₹ 5,50,000

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If current ratio is 2: 5 and current liabilities are Rs. 25,000 then current assets are

Rs. 62,500

Rs. 12,500

Rs. 10,000

Rs. 20,000

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Which of the following is liquid asset?

Debtors

Furniture

Goodwill

Machine

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List I	List II
1) Current Ratio	a) Solvency Ratios
2) Inventory Turnover Ratio	b) Liquidity Ratios
3) Return on Investment	c) Profitability Ratio
4) Proprietary Ratio	d) Activity Ratios

1(b), 2(d), 3(a), 4(c)

1(a), 2(b), 3(c), 4(d)

1(b), 2(d), 3(c), 4(a)

1(d), 2(a), 3(c), 4(b)

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Creditors turnover ratio includes

Total credit purchase

Total credit sales.

Total cash sales

Total cash purchase

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The term fixed assets include :-

Cash

Machinery

Debtor

Prepaid expense

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Q10

Operating Ratio is :-

Profitability Ratio

Activity Ratio

Solvency Ratio

None of these

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Q11

Current assets include only those assets which are expected to be realised within

3 months

6 months

1 year

2 years

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