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Chapter Summary

Accounting Ratios

CBSE · Class 12 · Accountancy

Summary of Accounting Ratios for CBSE Class 12 Accountancy. Key concepts, important points, and chapter overview.

125 questions80 flashcards5 concepts

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Overview

Accounting ratios are mathematical relationships between two accounting figures taken from financial statements. They help in analysing liquidity, solvency, efficiency, and profitability. Ratios are expressed as fractions, proportions, percentages, or number of times. They simplify financial data an

Key Concepts

Ratio analysis studies the relationship between

Ratio analysis studies the relationship between two or more accounting figures to assess the financial position and performance of a business. It is u

Ratios are classified in two ways

Ratios are classified in two ways: traditional classification and functional classification. Traditional classification includes statement of profit a

Current Ratio = Current Assets /

Current Ratio = Current Assets / Current Liabilities. It measures short-term liquidity and is normally considered safe at 2:1.

Quick Ratio = Quick Assets /

Quick Ratio = Quick Assets / Current Liabilities. Quick assets exclude inventories and other current assets like prepaid expenses and advance tax. A s

Debt

Debt-Equity Ratio = Long-term Debts / Shareholders' Funds. It measures the degree of indebtedness and is normally considered safe at 2:1.

Learning Objectives

  • Understand the meaning and purpose of accounting ratios
  • Classify ratios into liquidity, solvency, activity, and profitability groups
  • Calculate major ratios from financial statements
  • Interpret ratios for financial analysis and comparison
  • Use ratios to judge short-term safety, long-term stability, efficiency, and profitability

Frequently Asked Questions

What are the important topics in Accounting Ratios for CBSE Class 12 Accountancy?
Accounting Ratios covers several key topics that are frequently asked in CBSE Class 12 board exams. Focus on the core concepts listed on this page and practise related questions to build confidence.
How to score full marks in Accounting Ratios — CBSE Class 12 Accountancy?
Understand the core concepts first, then work through the 125 practice questions available for this chapter. Revise formulas and definitions regularly, and use flashcards for quick recall before the exam.

Sources & Official References

Content is aligned to the official syllabus. Refer to the board website for the latest curriculum.

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