NCERT Solutions Class 12 Accountancy Ch 9 Accounting Ratios PDF

Strategic angle. Think of ratio analysis as the X-ray of financial statements: the balance sheet shows the bones, the P&L shows the heartbeat, but a ratio reveals the underlying condition by setting one figure against another.

1. Step 1: Pick two related figures. Current Assets goes with Current Liabilities (both short-term); Net Profit goes with Revenue (output over input). Random pairings produce meaningless ratios.
2. Step 2: Express the relationship. As a quotient (2 : 1), pure number (2), percentage (40%), or rate (4 times). The form is chosen for readability.
3. Step 3: Benchmark it. Compare against (a) the firm's own prior year (trend analysis), (b) industry average (cross-section analysis), (c) a budgeted target (variance analysis).
4. Step 4: Interpret with caution. A high current ratio is not always good (idle cash); a high debt-equity ratio is not always bad (use in expansion phase).

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Ratio analysis = pick two related figures → express as a ratio → benchmark → interpret. It is the diagnostic engine of financial-statement analysis.

Quick reading. Four boxes, one each for short-term safety, long-term safety, efficiency and returns.

1. Liquidity → Current Ratio, Quick Ratio.
2. Solvency → Debt-Equity, TADR, Proprietary, Interest Coverage.
3. Activity → Inventory TR, Receivables TR, Payables TR, Working Capital TR.
4. Profitability → GP %, NP %, Operating %, Operating Profit %, Return on Investment, EPS.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Liquidity, Solvency, Activity and Profitability ratios are the four NCERT families.

Structural observation. Each turnover ratio is a fraction with flow over stock. Pair the flow with the right stock and the formula writes itself.

1. Inventory TR: Cost of Revenue over Average Inventory.
2. Receivables TR: Net Credit Revenue over Average Receivables.
3. Payables TR: Net Credit Purchases over Average Payables.
4. Working Capital TR: Revenue over (CA - CL).

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Numerator = flow; denominator = matching average stock. Higher ratio = faster turnover = better efficiency.

Quick reading. ``Long-term obligations'' ⇒ Solvency family, not Liquidity.

1. Debt-Equity (gearing).
2. TADR (asset cover for debt).
3. Proprietary (owner-financed share).
4. Interest Coverage (earnings cushion for interest).

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

The four solvency ratios, Debt-Equity, TADR, Proprietary and Interest Coverage, are the answer.

Strategic angle. If inventory ``turns'' five times a year, each rupee of inventory takes one-fifth of a year (73 days) to convert into a sale. That fraction-of-a-year is the holding period.

1. Inventory TR = 5 times per year.
2. Each cycle = 1/5 year = 73 days.
3. Hence the average inventory item is held for 73 days.
4. Lower ⇒ faster movement, less capital locked up.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Average Age = 365 / Inventory TR; lower is better.

Strategic angle. Two ratios, two granularities: Current Ratio asks the broad question (``can we pay short-term bills?''); Quick Ratio asks the strict question (``can we pay them today?''). Together they bracket short-term solvency.

1. Current Ratio = Current Assets / Current Liabilities, ideal 2 : 1.
2. Quick Ratio = (Current Assets - Inventory - Prepaid) / Current Liabilities, ideal 1 : 1.
3. Compare both: if Current Ratio is healthy but Quick Ratio is poor, inventory dominates the current assets → slow-moving stock alert.
4. Both must be read with the operating cycle in mind: a long cycle (e.g. heavy engineering) needs a higher Current Ratio than a short cycle (e.g. FMCG).

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Use Current Ratio for the broad cushion (target 2:1) and Quick Ratio for the strict cushion after stripping inventory (target 1:1).

Structural observation. Three ratios examine the balance sheet's right-hand side (funding mix: Debt-Equity, Proprietary, Capital Gearing); one ratio cross-checks the left-hand side (asset cover: TADR); one cross-checks the P&L (earnings cushion: Interest Coverage).

1. Right-hand mix: Debt-Equity (debt to equity), Proprietary (equity share of total), Capital Gearing (fixed-cost funding share).
2. Left-hand cover: TADR (asset cover for debt).
3. P&L cushion: Interest Coverage (earnings vs. interest).
4. Read together: a firm with a 2 : 1 Debt-Equity, TADR of 1.5, Proprietary 0.33 and Interest Coverage 5 is at the upper safe limit.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Five ratios across the two financial statements give a complete solvency picture.

Quick reading. Two sub-families: margin (% of sales) and return (% of capital). Together they answer the question ``Is the business worth running?''

1. Margin ratios (over revenue): GP, Operating, Operating Profit, NP.
2. Return ratios (over capital): ROI, EPS.
3. Compute by plugging into the standard formula; numerator and denominator are taken from the Statement of P&L and Balance Sheet respectively.
4. Compare across years (trend) and against industry average (benchmark).

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Margin family + Return family = complete profitability picture.

Strategic angle. The two ratios differ only by inventory. If inventory is honest cash (FMCG), strip it out for a stricter test (Quick Ratio). If inventory is wishful cash (real estate), keeping it in is the fairer view (Current Ratio).

1. Pick the ratio whose assumption about inventory matches reality.
2. Heavy/long-cycle inventory → Current Ratio.
3. Fast-moving inventory → Quick Ratio.
4. Always state both and explain the choice.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

The better liquidity ratio is the one whose treatment of inventory matches the firm's inventory profile.

Quick reading. The only Current Liability is Trade Payables (Rs. 72,000). Add up the three Current Assets, divide.

1. Sum of Current Assets: 55,800 + 28,800 + 59,400 = 1,44,000.
2. Current Liabilities = 72,000.
3. Ratio = 1,44,000 / 72,000 = 2.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Current Ratio = 2 : 1, comfortably above the ideal benchmark.

Strategic angle. CL = Rs. 30 lakh dominates this balance sheet because Trade Payables alone is Rs. 23.4 lakh. The firm is squeezed on short-term cash even though long-term funding looks fine.

1. CA = 12 + 9 + 2.28 + 0.72 = 24 lakh.
2. CL = 6 + 23.4 + 0.6 = 30 lakh.
3. Current Ratio = 24/30 = 0.8 : 1.
4. LA = 24 - 12 = 12 lakh; Liquid Ratio = 12/30 = 0.4 : 1.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Current Ratio = 0.8 : 1, Liquid Ratio = 0.4 : 1, below ideal.

Quick reading. Working Capital is the difference between CA and CL; the ratio gives their multiplicative relation. One unknown, one equation.

1. Let CL = x, CA = 3.5x.
2. Difference: 2.5x = 90,000, hence x = 36,000.
3. CA = 3.5 × 36,000 = 1,26,000.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

CA = Rs. 1,26,000; CL = Rs. 36,000.

Structural observation. The difference of the two ratios isolates inventory's share of CL, a one-line shortcut that bypasses any system-of-equations setup.

1. 4.5 - 3 = 1.5 ⇒ Inventory/CL = 1.5.
2. CL = 36,000 / 1.5 = 24,000.
3. CA = 4.5 × 24,000 = 1,08,000.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

CL = Rs. 24,000; CA = Rs. 1,08,000.

Quick reading. Multiply CL by each ratio for CA and LA; subtract for Inventory.

1. CA = 4 × 75,000 = 3,00,000.
2. LA = 1 × 75,000 = 75,000.
3. Inventory = 3,00,000 - 75,000 = 2,25,000.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

CA Rs. 3,00,000; LA Rs. 75,000; Inventory Rs. 2,25,000.

Quick reading. Use the Quick Ratio to extract CL, add back inventory for CA, divide.

1. CL = 1,00,000 / 2 = 50,000.
2. CA = 1,00,000 + 20,000 = 1,20,000.
3. Current Ratio = 1,20,000 / 50,000 = 2.4 : 1.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Current Ratio = 2.4 : 1.

Structural observation. The accounting equation gives Shareholders' Funds residually once Total Assets and Total Debts are known.

1. Shareholders' Funds = 15 - 12 = 3 lakh.
2. Long-term Debt = 12 - 6 = 6 lakh.
3. Debt-Equity = 6 / 3 = 2 : 1.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Debt-Equity = 2 : 1.

Quick reading. Same template as Q6: extract CL from Quick Ratio, add inventory for CA, divide.

1. CL = 24,00,000 / 2 = 12,00,000.
2. CA = 24,00,000 + 6,00,000 = 30,00,000.
3. Current Ratio = 30,00,000 / 12,00,000 = 2.5 : 1.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Current Ratio = 2.5 : 1.

Quick reading. Revenue - Gross Profit gives Cost of Revenue. Average Inventory comes from the two end-points.

1. COGS = 2,00,000 - 50,000 = 1,50,000.
2. Opening Inventory = 60,000 - 20,000 = 40,000.
3. Average Inventory = (40,000 + 60,000)/2 = 50,000.
4. Inventory TR = 1,50,000 / 50,000 = 3 times.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Inventory Turnover Ratio = 3 times.

Structural observation. Two liquidity ratios off the balance sheet, two profitability ratios off the P&L; all four use the same primary figures plus an inventory split-out.

1. Current Ratio: 35/17.5 = 2 : 1.
2. Liquid Ratio: (35-15)/17.5 = 20/17.5 = 1.14 : 1.
3. Operating Ratio: (30+20)/60 × 100 = 83.33%.
4. Gross Profit Ratio: (60-30)/60 × 100 = 50%.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

2 : 1, 1.14 : 1, 83.33%, 50%.

Strategic angle. Build a small ``derived data'' table once, then plug into six formulae.

Derived: GP = 6,00,000; CA = 15,60,000; WC = 9,60,000.

1. GP Ratio = 6,00,000/25,20,000 × 100 = 23.81%.
2. Inventory TR = 19,20,000/8,00,000 = 2.4 times.
3. Current Ratio = 15,60,000/6,00,000 = 2.6 : 1.
4. Liquid Ratio = 7,60,000/6,00,000 = 1.27 : 1.
5. NP Ratio = 3,60,000/25,20,000 × 100 = 14.29%.
6. WCTR = 25,20,000/9,60,000 = 2.625 times.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

23.81%, 2.4, 2.6:1, 1.27:1, 14.29%, 2.625.

Quick reading. Working Capital is small (Rs. 1.2 lakh) so WCTR is high. Debt is small relative to equity (2 : 5) so use is low.

1. WC = 4 - 2.8 = 1.2 lakh; WCTR = 10/1.2 = 8.33 times.
2. D/E = 2/5 = 0.4 : 1.
3. Proprietary = 5/(5+2) = 0.71 : 1 (NCERT convention).

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

8.33 times, 0.4 : 1, 0.71 : 1.

Quick reading. The Sales / Sales Return figures are decoys for this formula, the ratio uses cost, not revenue.

1. COGS = 76,250 + 3,22,250 - 98,500 = 3,00,000.
2. Average Inventory = (76,250 + 98,500)/2 = 87,375.
3. Ratio = 3,00,000 / 87,375 = 3.43 times.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Inventory TR = 3.43 times.

Quick reading. Add carriage to purchases before computing COGS.

1. COGS = 10,000 + 25,000 + 2,500 - 5,000 = 32,500.
2. Average Inventory = 7,500.
3. Inventory TR = 32,500 / 7,500 = 4.33 times.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Inventory TR = 4.33 times.

Strategic angle. Inventory TR gives COGS directly; the GP-on-sales rule gives Sales; subtract.

1. COGS = 8 × 20,000 = 1,60,000.
2. Sales = 1,60,000 / 0.80 = 2,00,000.
3. GP = 2,00,000 × 0.20 = 40,000.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Gross Profit = Rs. 40,000.

Quick reading. Use GP-on-cost to convert Revenue to COGS, then apply the two turnover formulae following the NCERT key conventions (Rs. 9,00,000 as inventory base, average TR).

1. 2015-16: COGS = 30,00,000 / 1.25 = 24,00,000; ITR = 24,00,000 / 9,00 ,000 = 2.67 times.
2. 2015-16: Avg TR = (4 + 5)/2 = 4.5 lakh; TRTR = 4.41 times (NCERT key).
3. 2016-17: COGS = 24,00,000 / 1.25 = 19,20,000; ITR = 19,20,000 / 9,00 ,000 = 2.13 times.
4. 2016-17: Avg TR = (5 + 5.6)/2 = 5.3 lakh; TRTR = 24,00,000 / 5,30,000 = 4.53 times.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

2015-16: ITR 2.67, TRTR 4.41. 2016-17: ITR 2.13, TRTR 4.53.

Quick reading. SF = 19; LTD = 12; CA = 18; CL = 5; WC = 13 (lakhs).

1. D/E = 12/19 = 0.63 : 1.
2. WCTR = 18/13 = 1.38 times.
3. TRTR = 18/9 = 2 times.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

0.63 : 1; 1.38 times; 2 times.

Strategic angle. The big-three profitability and liquidity ratios all from one data set , isolate LR, then ITR, then ROI by stacking the numerator and denominator separately.

1. LR = (40 + 100)/(190 + 70) = 140/260 = 0.54 : 1.
2. COGS = 400 - 194 = 206; Avg Inv = 55; ITR = 206/55 = 3.75.
3. PBIT = 217.9 + 25 = 242.9; CE = 200 + 120 + 20 + 250 = 590; ROI = 242.9/590 × 100 = 41.17%. (All figures in thousands of rupees.)

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

0.54 : 1; 3.75 times; 41.17%.

Quick reading. Stack SF = 1,75,000 and LTD = 75,000; CL = 50,000; Total = 3,00,000. Plug into three formulae.

1. D/E = 75,000 / 1,75,000 = 0.43 : 1.
2. TADR = 3,00,000 / 75,000 = 4 : 1.
3. Proprietary = 1,75,000 / 3,00,000 = 0.58 : 1.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

0.43 : 1; 4 : 1; 0.58 : 1.

Quick reading. Add cost and operating expenses, divide by revenue, multiply by 100.

1. Numerator = 1,50,000 + 60,000 = 2,10,000.
2. Operating Ratio = 2,10,000/2,50,000 × 100 = 84%.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

Operating Ratio = 84%.

Quick reading. Five ratios off one balance sheet; build CA and FA totals once, then plug into five formulae.

1. GP Ratio = 50/100 × 100 = 50%.
2. Current Ratio = 60/40 = 1.5 : 1.
3. Quick Ratio = 45/40 = 1.125 : 1.
4. ITR = 50/15 = 3.33 times.
5. FATR = 100/100 = 1 : 1.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

50%; 1.5 : 1; 1.125 : 1; 3.33 times; 1 : 1.

Strategic angle. Three turnover-style ratios; numerators come from the P&L, denominators come from the balance sheet.

1. GP Ratio = 60,000/3,00,000 × 100 = 20%.
2. Avg Inventory = (58+62)/2 = 60 thousand; ITR = 240/60 = 4 times.
3. TRTR = 3,00,000/32,000 = 9.375 times.

Why this matters. In a Class 12 numerical question on Accounting Ratios, the examiner gives full marks only when the candidate writes the formula in symbolic form, substitutes the figures with labels, computes the ratio to two decimal places, and gives a one-line interpretation comparing the ratio to the conventional benchmark. A bare numerical answer without the formula and the interpretation loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Current Ratio with Quick Ratio by either including inventory and prepaid expenses in the quick assets or excluding them from current assets; (b) using the closing balance of trade receivables or inventory instead of the average of opening and closing balances for turnover ratios; (c) using net credit sales for Trade Receivables Turnover but using total revenue for Inventory Turnover, when each ratio has a specific numerator definition.

20%; 4 times; 9.375 times.