CASE-BASED QUESTIONS

along with a
analyse their profitability position check on
I. Apharmaceutical company wanted to
available for your reference:
their
levelof past two years. The
following data is
2021-22 ()
42,00,000
2022-23 ()
60,00,000
inveoTy
Revenue from Operations 15,00,000
7,20,000
lnventory on 31st March 25% on cost of
2021-22, the inventory increased by 20%. Gross profit is revenue of
During the year
You are required to answer the
following questions on the
inventory increased during the year
basis of the
2021-22.
above informas:
operationS,
I. State the amount of (b) 80,000 (c) 1,20,000 (d) 72,000
(a) 1,44,000
2021-22 is
II. The average inventory of the year (c) 9,12,000
(a) 6,60,000 (b) ? 9,36,000 (d) ? 6,80,000
2021-22 is
II. The inventory turnover ratio of year (c) 5.09 times
(a)4.05 times (b) 5.7 times (d) 4.87 times
IV. Inventory turnover Ratio of 2022-23 is (c) 4.05 times
(a) 4.87 times (b) 5.7 times (d) 4.32 times
2. creditpolicy and see how much
AlphaLtd., an electronic manufacturing company want to analyse its given
are below:
is usually blocked in Trade Receivables. For this, some details
Trade Receivables Turnover Ratio 4 times

Cost of Revenue from Operations 6,40,000

Gross Profit Ratio 20%

Closing Trade Receivables were 20,000 mnore than at the beginning.

1
Cash Revenue from Operations being 33% of Credit Revenue from Operations.
3
From the information given above, answer the following questions:
I. State the amount of Revenue from operations.
(a) 6,00,000 (b) ? 8,00,000 (c) 10,00,000 (d) 12,00,000
II. State the amount of Gross Profit earned during the year.
(a) 1,60,000 (b) 1,40,000 (c) 1,00,000 (d) ? 1,28,000
III. State the amount of opening Trade Receivables.
(a) 1,20,000 (b) ? 1,60,000 (c) 1,40,000 (d) 1,00,000
IV. State the amount of closing Trade Receivables.
(a) 1,20,000 (b) 1,40,000 (c) ? 1,60,000 (d) 1,00,000

NOW IT'S YOUR TURN

neither
1. Afirm's current ratio is 1.75: 1. If current liabilities cash basis'
Reason (R):'Sale of goods on
are80,000, then its working capital will be: affect 'Debt' nor Equity'. which
statementsS
(a) 1,20,000 (b) ? 1,60,000 In the context of the above twO [CBSE2021]
(c) 60,000 (d) ? 2,80,000 of the following is correct: (R)is he
and
2. Given below are twO statements, one labelled as are correct
(a) Both (A) and(R)
Assertion (A) and the other labelled as Reason (R). Correct reason of (A).

Assertion (A): 'Sale of goods for cash' does not (b) Only (A) is correct.
effect Debt-Equity ratio. (c) Only (R) is correct. incorrect.
(d) Both (A) and (R) are

Afic Test
 Accounting Ratios 345

Given below are two statements, one labelled as liguidity ratios are
J. Assertion (A) and the other labelled as Reason 9. The current ratio and assets
Current
2.10: 1 and 1.90 : 1 respectively.Find out liquid
include Inventory of 16.000.
(R).
Assertion((A): Operating ratio is =100 - operating assets and working capital.
are 1,60,000. Its
profitratio. 10. Current liabilities of a company ratio is 2.5:1.
Benson (R): Operating ratio is computed to reveal Liquid ratio is 1.5:1 and Current assets.
the operating margin on products sold. Calculate Quick assets and Current [AI 2013]
In the context of the above two statements which (6,00,000) to Current
ol the following is correct: I1. The ratio of Current Assets
Liabilities ( 4.00.000) is 1.5 :1. The accountant
(a) Both statements are incorrect. maintaining a Current
of the firm is interested in
(b) (A) is correct but (R) is incorrect. of the current
ratio of 2: 1, by paying off a partcurrent
(c) (A) is incorrect but (R) is correct. liabilities. Compute the amount of
liabilities
(d) Both (A)and (R) are correct and (R)is thbe that should be paid, so that the current ratio at
correct reason of (A). [CBSE 2021]
the level of 2 : 1may be maintained. [Foreign 2013]
A Afirm's current assets are ? 3,60,000, current ratio
is 3: 1. Cost of revenue from operations is is 2: 1. State with
12. The current ratio of YLtd. transactions would
12,00,000. Its working capital turnovér ratio will reason which of the following
the
be:
(b) 5 times () increase; (ii)decrease or (iii) not change
(a) 3 times ratio.
(d) 4 times of
(c) 8 times (a) Trade receivables included debtors
choices
Choose the correct answer out of the following 40,000 which were received.
45,000.
(0.5 to Q.7): (b) Company purchased furniture of
is the correct The vendor was paid by issue of equity shares
(a) Both (A) and (R) are true and (R) [Delhi 2014]
explanation of (A). of 10 each at par.
State with
(b) Both (A) and (R) are true but (R)
is not the 13. The Quick Ratio of a company is 1.5:1. would
which of the following transactions
correct explanation of (A). reason
change
(i) increase: (ii) decrease or (iii) not
(c) (A) is true but (R) is false. the ratio:
(d) (A) is false but (R) is true. (a) Paid rent 3,000 in advance.
are the ratios that
5. Assertion (A): Activity Ratios (b) Trade receivables included a debt as
Shri
efficiency of
are calculated for measuring the utilisation Ashok who paid his entire amount due
operations of business based on effective 9,700. [AI 2014]
of resources.
Ratio are 14. From the following information, compute Debt
Reason (R): Current Ratio and Quick Equity Ratio: [Delhi 2014]
liquidity ratios. ()
financial statements
6. Assertion (A):The limitations of ratio analysis. Long-term Borrowings 8,00,000
also form the limitations of the
Long-term Provisions 4,00,000
derived from the
Reason (R): Since the ratios are Current Liabilities 2,00,000
original
financial statements, any weakness in the derived Non-current Assets 14,40,000
financial statements will also creep in the
ratios. 3,60,000
analysis in the form of accounting Current Assets
ratio is 1:2, it is Assets to Debt ratio' from the
1. Assertion (A): If debt equity 15. (a) Calculate "Total
following information:
considered to be safe.
of view, capital ()
Keason (R): From security pointmore equity is Equity Share Capital 4,00,000
Structure with less debt and 1,80,000
the chances Long-term Borrowings
COnsidered favourable as it reduces
Surplus i.e. Balance in
of bankruptcy. quick
8. Z Ltd. has a current ratio of 3.5: 1 and Statement of Profit and Loss 1,00,000
current assets
of General Reserve 70,000
tatio of 1.5:1. If the excess
as represented by inventory is Current Liabilities 30,000
Over quick assets and current
TO0,000, calculate current
assets Long Term Provisions 1,20,000
liabilities.

'CET
Delhl 4500 BBA
346 gcher uitk Accountancy--12
(b) The Debt-Equity ratio of acompany is 1:2. 20. From the following information.
State whether 'Issue of bonus shares' will Capital Employed Ratio. computeI Debt to
increase, decrease or not change the Debt
Equity Ratio. [Delhi 2019] Long-term Borrowings )
l6. From the following information, compute Fixed Current Liabilities S,00,000
Assets Turnover Ratio. Non-current Assets 1,75,000
() Current Assets 8,3,25,000
50,000
Gross Fixed Assets 35,00,000; 21. From the following information, compute Fived
Current Assets 45,00,000; Assets Turnover Ratio.
Current Liabilities 23,00,000; ()
12% Debentures 48,00,000 Capital Employed
Investment
45,50,000
Accumulated Depreciation 2,40,000
on Fixed Assets S,00,000 Plant
7,00,000
Revenue from Operations 1,30,00,000 Trade Receivables 3,00,000
17. Calculate Debt Equity Ratio' from the following Working Capital 15,00,000
information: Cash and Cash Equivalents 4,50,000
Total Assets 3,50,000; Total Debt 2,50,000and Equity Share Capital 22,50,000
Current Liabilities 80,000. [Delhi 2013] 8% Debentures 19,00,000
18. Calculate Net Assets Turnover Ratio from the
Capital Reserve 4,40,000
following information: Revenue from Operations 1,50,00,000
() Surplus (Balance in statement
Building 2,00,000 of Profit and Loss)
(40,000)
Goodwill 40,000 22. Calculate Debt to Capital Employed Ratio from
Non-current Investments the following information:
(Trade Investments) 30,000
7% Debentures
Inventory (including Loose 7,00,000
Tools 10,000) 1,90,000 Plant and Machinery 2,20,000
Trade Receivables 1,20,000 Provision for Employee Benefits 60,000
Cash and Cash Equivalents 50,000
Vehicles 6,00,000
Goodwill 1,00,000
Trade Payables 60,000
Cost of Revenue from Operations 14,20,000 Non-current Investments
Gross Profit 25% on Cost (Trade Investments) 2,40,000
19. From the following information, calculate Total Inventory 4,50,000
Assets to Debt Ratio: Trade Receivables 3,20,000
[AI 2015C]
Trade Payables 2,00,000
) 23. From the following information related to 2022-23,
Capital Employed 40,00,000 compute Fixed Assets Turnover Ratio.
Investment 2,40,000
Plant
)
7,00,000 Total Assets 45,00,000
Trade Receivables
4,00,000 Working Capital 15,00,000
Cash and Cash Equivalents 3,60,000 Current Liabilities 8,00,000
Equity Share Capital 22,50,000 Revenue from Operations 85,00,000
8% Debentures 24. Debt to Capital State
18,00,000 ratio is 0.3: 1.
Capital Reserve 3,40,000
Employed
whether the following transactions, willimprove,
to
Surplus (Balance in Statement of decline or will have no changeon the Debt
for
Capital Employed Ratio. Also give rcasons
Profit and Loss) (50,000) the same.
 Accounting Ratios 347
() Sale of Equipmentscosting ? 10,00,000 for J1, Rate of Gross profit on cost of acompany is 250.
9,00,000. 5,00,000 Its shareholders'
(:X Purchased Goods on Credit for 1,00,000 for Its Gross profit is liabilitiesare
Funds are 12,00.000: Current
a credit of 15 months, assuming operating 10,00,000.
? 3,00,000and current Assets are
cycle is of 18 months.
Calculate its Working Capital Turnover ratio.
() Conversion of Debentures into Equity Shares (Delhi 2017C]
of 2,00,000. following:
(iv) Tax Refund of ?50,000 during the year. 32. From the given information calculate the
(i)) Cost of revenue from operations
1 The net profit after interest and tax of a company
was 1,20,000; Rate or income tax is 40%. The (ti) Opening and closing inventory
company has 10% debentures of 1.00.000 (iüi) Quick Assets and
Calculate interest coverage ratio. [AI 2017C] (iv) Current Assets
26 From the information available from the books Information:
the
Ram Nath Limited on 31.03.2022, calculate: Inventory turnover ratio 6 times, Inventory at
end is 6,000 more than the inventory in the
(a) Liquid Ratio and (b) Inventory Turnover Ratio.
Inventory? 1,00,000, Trade Receivables 1,20,000, beginning, Revenue from operations (all credits)
? 2,40,000, Gross profit 25% on cost,
Current
Advance Tax 4,00,000, Cash and Cash Equivalent 0.80: 1.
liabilities 80,000, Quick ratio
T60,000, Trade Payables 1,05,000, Bank overdraft [Delhi 2016C]
T8,000, Cost of Revenue from Operations 4,20,000.
Additional Information: 33. From the following information related to a
Company, calculate inventory turnover ratio :
Closing inventory was 20,000 more than opening Opening inventory 20,000; Closing inventory
[Delhi 2013C Mod.]
inventory. 22,000; Purchases 80,000; Wages ? 9,000;
Turnover Ratio from Carriage outwards 2,000; Returns outwards
temen 27. Compute Trade Receivables
the following information : ? 1,000; Revenue from operations 80,000;
Cash Revenue from Operations 5,20,000; Cash Carriage inwards 4,000; Rent? 5,000. [AI 2017C)
Revenue from Operations 60% of the
credit 34. Calculate Trade Receivables Turnover Ratio from
80,000,
revenue from operations; closing debtors the following:
debtors.
opening debtors are 3/4th of closing [AI 2013]
Particulars ()
Total Revenue from Operations for the
Turnover Ratio' from
28. Compute Working Capital year (Credit Revenue from Operations:
the following information : 70% of Total Revenue from Operations) 12,00,000
1,30,000; Credit Returns Inwards (4/5th out of Credit
Cash Revenue from Operations Returns
Revenue from Operations 3,80,000;1,40,000; Revenue from Operations) 50,000
inwards 10,000: Liquid Assets? Inventory Opening Trade Receivables 73,250
Current Liabilities 1.05,000 and[Delhi2013] Closing Trade Receivables 86,750
90,000.
related to 2021-22, 35. From the following information related to 2021-22,
29, From the following information Ratio. compute Net Assets Turnover Ratio:
compute Fixed Assets Turnover Total Liabilities 24,00,000; Current Liabilities
()
4,00,000; Revenue from Operations 85,00,000
Gross Fixed Assets (Property, 16,00,000
Profit
36. From the following calculate the GrossRatio'.
Plant and Equipments) Ratio' and Working Capital Turnover
7,00,000 [Delhi 2014C]
Current Assets
2,50,000 )
Current Liabilities
4,00,000 Revenue from Operations 30,00,000
Trade Investments
2,50,000 from Operations 20,00,000
Accumulated Depreciation Cost of Revenue
60,00,000 Current Assets 6,00,000
Revenue From Operations
calculateinventory Current Liabilites 2,00,000
30. From the followingginformation [AI2016]
Subscribed and fully paid
turnover ratio:
16,00,000; Average 5,00,000
Kevenue from operations Ratio 5%.
up capital
Inventory 2,20.000: Gross Loss
348 a9ether witk
Accountancy-12
37. From the following information, calculate
Fixed (c) Working Capital Turnover Ratio
Assets Turnover Ratio. (d) Return on Investment.
() Information:
Long-term Borrowings 5,00,000 Equity Share Capital 5,50,000; General
Current Liabilities 1,75,000 Reserve 50,000; Profit after Tax and
Non-current Assets (Net) 8,50,000 1,00,000; 9% Long-term BorrOWings? Interest
Trade Payables ? 1,00,000; Land and 2,00.000
Current Assets 3,25,000
Revenue from Operations Buildin
40,00,000 Z6,50,000; Equipments? 1,50,000; Trade receivables
38. From the following information calculate 1,45,000; Cash and Cash
operating
ratio: Revenue from Operations Equivalents 55,000.
for the year ended
Revenue from Operations 6,80,000; Rate of Gross 31.3.2012 was 15,00,000 and Tax paid 50%.
Profit on cost 25%; Selling expenses? 1,44,000; 44. Cost of Revenue from Operations is
Administrative expenses 73,000. (Delhi 2016] 1,50,000.go
Operating expenses are 60,000, Revenue from ple
39. With the help of the following information,
calculate Operations is
2,50,000. Calculate Operating
return on Investment; Net Profit after interest and
Ratio.
[NCERT]
Tax 9,00,000; 10% Debentures 12,00,000; Tax @ 45. A company has inventory of ? 1,80,000, trade
40%; Capital Employed 82,20,000. [Delhi 2015C] receivables of 1,20,000 and Inventory
40. From the following information related to Ratio 6 times. The gross profit marginTurnover
of the aat
Ltd. calculate (a) Return on Naveen company is 10% and its credit revenue from
Total Assets to Debt Ratio.
Investment and (b) operations are 20% of the total revenue from
Information: FixedAssets 75,00,000; Current Assets operations. Calculate the average collection
40,00,000; Current Liabilities ? 27,00,000; 12% period (Assume 360 days in a year). Equt
Debentures 80,00,000 and Net Profit before 46. The following information is provided to you:
Interest, Tax and
Dividend 14,50,000. [Delhi2015) Trade Receivables turnover ratio: 4 times, Inventory nit
41. From the following information related to turnover ratio: 8 times, Current ratio:3, Average
2022-23, Trade Receivables: 1,80,000, Working capital Surp
compute Fixed Assets Turnover Ratio.
turnover ratio: 8 times, Cash Revenue from rc
Plant and Machinery Operations: 25% of totalrevenue from operations, om
5,50,000 1
Land and Building 3,30,000 Gross profit ratio: 33%. Asset
Motor Car
Furniture
2,70,000 Closing Inventory: 10,000 in excess of Opening
Inventory
1,25,000
1,45,000
Inventory. id.
Debtors Based on the above information calculate any two Uute
3,40,000 (a) Revenue from Operations, (b) Cost of Revenueve
Bank 2,20,000
Cash 50,000
from Operations and (c) Closing Inventory.
Creditors 47. From the following information, find out the cost of
2,65,000
Bills payable 40,000
revenue from operations; revenue from operationsE
Outstanding Rent and closing inventory.
30,000 () Average Inventory Holdings (or Inventory Msi
Revenue from Operations for the year 2022-23
were 35,00,000. Velocity)
(iü) Gross Profit Ratio
2 months
20%
42. State with reason whether the following (iiü) Gross Profit
will increase, decrease or not change transactions
60.000
the 'Return (V) Closing inventory was 5,000 in excess 0IDe
on Inyestment:
(i) Purchase of opening inventory.
machineryworth2,00,000 by issue
of equity shares.
48. From the following information, compute DeDt to
Capital Employed Ratio.
(i) Charging depreciation ofT 5,000 on
(ii) Redemption of debentures in cashmachinery. ()
(iv) Converting? 50,000,9% debentures 70,000. Gross Fixed Assets 75,00,000
shares. intoequity Current Assets 40,00,000
|Foreign 2017]
43. From the following Current Liabilities 27,00,000
information,
of the following ratios calculate any two 12% Debentures 40,00,000
(a) Debt Equity Ratio
(b) Interest Coverage Ratio Accumulated Depreciation
on Fixed Assets 5,00,000
 Accounting Ratios 349
information relatedItto 2022-23, at the end; Revenue from Operations 6,00,000,
Fromthefollowing Current Liabilities R60.000: Gross Profit Ratio
J9. compute Fixed Assets Turnover Ratio.
25%, Quick Ratio 0.75:1
Equity share capital 6,00,000 From the information given above, answer the
1,50,000 following questions: from
I. State the amount of Cost of Revenue
General reserve
Balance in Statement of Profit Operations.
and Loss (Dr.) 2,50,000 (a) 4,50,000 (b) ? 4,90,000
4,50,000 (c) 4,80,000 (d) 3,50,000
12% Debentures
1,40,000 II. State the amount of average inventory.
Creditors (a) 1,25,000 (b) ? 1,12,500
Revenue from Operations for the year 2022-23 (c) 2,50,000 (d) 1,52,000
were 30,00,000. II State the amount of closing inventory.
50. From the following information, compute Debt to (a) 1,12,000 (b) ? 1,12,500
Capital Employed Ratio. (d) 1,22,500
(c) 1,67,500 Guru Ltd.
) IV. State the current ratio of Accounts
(a) 2.4 :1 (b) 2.5:1
Capital Employed 43,50,000
(c) 2.79:1 (d) 2.6:1
Investment 2,40,000
know the
7,00,000 53. Teaching Point Ltd. is interested to their
Plant return on their total investment made in
4,00,000
Trade Receivables
company. The company is also interested to
Cash and Cash Equivalents 3,60,000 know what portion of the total assets have been
Equity Share Capital 22,50,000 financed through Long-term Debts. Net profit
18,00,000 after interest and tax 1,00,000; Current assets
8% Debentures
3,40,000 4,00,000; Current liabilities 2,00,000; Tax rate
Capital Reserve 20%; Fixed assets 6,00,000; 10% Long-term
Surplus (Balance in Statement debt 4,00,000.
of Profit and Loss) (50,000) On the basis of the above information, answer the
51. From the following information, compute Fixed following questions:
Assets Turnover Ratio. I. State the amount of Capital Employed.
() (a) ? 10,00,000 (b) ? 6,00,000
5,00,000 (c) 8,00,000 (d) 12,00,000
Paid-up Share Capital II. State the amount of Net Profit before Interest
Current Assets
4,00,000
and Tax.
Revenue from Operations 60,00,000
(a) ? 1,25,000 (b) 1,45,000
2,00,000 (c) 1,65,000
13% Debentures (d) ? 1,90,000
Current Liabilities
2,80,000 III. The Return on Investment is
liquidity
52. Accounts Guru Ltd. want to analyse itsInventory
(a) 20.62% (b) 21%
position along with assessment of (c) 21.62% (d) 19.62%
IV. Find Total Asset to Debt Ratio.
position from the given information:
in (a) 2.4 times (b) 2.5 times
Inventory Turnover Ratio: 4 times; Inventory (c) 3 times
than Inventory (d) 4 times
the beginning was 20,000 less