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Accounting Ratios — Revision Notes

Madhya Pradesh Board · Class 12 · Accountancy

Accounting Ratios revision notes for Madhya Pradesh Board Class 12 Accountancy: 4 topics in quick points. Includes Meaning, Use, and Classification.

125 questions80 flashcards9 formulas & key relations5 concepts

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An infographic illustrating the role of accounting ratios as a tool for financial statement analysis, showing how they help assess profitability, liquidity, solvency, and efficiency for various stakeh
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Key Topics to Revise

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1. Meaning, Use, and Classification of Ratios

  • A ratio is a mathematical number showing the relationship of two or more numbers.
  • Accounting ratios are derived from financial statements and help in financial statement analysis.
  • Ratio analysis is used to assess solvency, liquidity, efficiency, and profitability.
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2. Liquidity Ratios

  • Liquidity ratios measure short-term solvency.
  • They show the ability of a business to meet current obligations.
  • The two important liquidity ratios are Current Ratio and Quick Ratio.
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3. Solvency Ratios

  • Solvency ratios are long-term ratios.
  • They measure the ability of a business to meet long-term obligations.
  • Important solvency ratios are Debt-Equity Ratio, Debt to Capital Employed Ratio, Proprietary Ratio, Total Assets to Debt Ratio, and Interest Coverage Ratio.
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4. Activity or Turnover Ratios

  • Activity ratios measure the speed and efficiency with which business resources are used.
  • They are also called turnover ratios or efficiency ratios.
  • Important activity ratios are Inventory Turnover Ratio, Trade Receivables Turnover Ratio, Trade Payables Turnover Ratio, and Net Assets or Capital Employed Turnover Ratio.

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Full Notes

Key Concepts

Ratio analysis studies the relationship betweenRatios are classified in two waysCurrent Ratio = Current Assets /Quick Ratio = Quick Assets /Debt

Frequently Asked Questions

What are the important topics in Accounting Ratios for Madhya Pradesh Board Class 12 Accountancy?
Key topics in Accounting Ratios include Meaning, Use, and Classification of Ratios, Liquidity Ratios, Solvency Ratios, Activity or Turnover Ratios. Study these first, then practise questions on each for the Madhya Pradesh Board Class 12 board exam.
How should I revise Accounting Ratios for the Madhya Pradesh Board Class 12 board exam?
Learn the core ideas first, then work through the 125 practice questions on Accounting Ratios. Revise 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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All Madhya Pradesh Board Class 12 Accountancy Revision Notes

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