FEI Lage UN Cente ks Multiple Choice Questions (MCQs) Select the correct alternative: 1. Current Ratio establishes a relation between @® (Current Assets - Inventory) and Current Liabilities. ® Quick Assets and Current Li © Current Assets and Current Liabi @ None of the above. 2. Current Ratio is classified under the group of ® Solvency Ratios. ® Liquidity Ratios. © Activity Ratios, @ Profitability Ratios. 3. Proprietary Ratio falls under the group of ® Liquidity Ratios, ® Solvency Ratios. © Activity Ratios. @ Profitability Ratios. 4. Inventory Turnover Ratio falls under the group of @® Activity Ratios. © Solvency Ratios. © Profitability Ratios. @ Liquidity Ratios. 5. Young India Ltd. has Operating Profit Ratio of 20%. To maintain this ratio at 25%, management may @® Increase selling price of Stock-in-trade. ® Reduce Cost of Revenue from Operations. : © Increase selling price of Stock-in-Trade and to reduce Cost of Revenue from Operations. @ Allof the above. 6. A transaction involving a decrease in Debt-Equity Ratio and increase in Current Ratio is @ tssue of Debentures against the purchase of fixed assets. © Issue of Debentures for cash. © Redemption of Preference shares for cash. @ Issue of Equity shares for cash. 7. Current Ratio is 2 : 1. On the sale of fixed asset (Book value % 40,000) for € 36,000 on credit, the Current Ratio will @® Improve. ® Decline. © Not change. @ Can't say. 8. IFopening inventory is&1,20,000, Cost of Revenue from Operations is &10,00,000 and Inventory Turnover Ratio is 5 Times, then Closing Inventory will be @® %3,20,000. ® 280,000, © %1,60,000. © %4,00,000. 9. Working Capital Turnover Ratio falls under the group of @® Activity Ratios. ® Solvency Ratios, © Liquidity Ratios. @ Profitability Ratios,| i ve cet Investment falls under the Stoup of MCQ.131 #7 uiqusity Ratios, [|S sowency Ratios, ® Proftabtity Ratios, € ating Ratio falls under the group of ® Activity Ratios, 1 sativity Ratios. > activity Ratios, 3 solvency Ratios. ® liquidity ratios : ® Profitabitit i y Ratios, g. fst for Doubt Debts deducted fram Trade cen, @ current Ratio. 5 ables wile computing @ ade Receivables Turnover Ratio, @ — ay (a) and (b). 5, opeting Profit Ratio is classified under the group of @ Profitability Ratios. ee Sol © Liauidity Ratios, ® Solvency Ratios. @ Activity Ratios. 14 Tedifference between Total Assets and Current Liabiities is @ Total Assets. © Total Debts. © Capital Employed. @© Shareholders’ Funds, 15, Theaggregate of Non-current Assets and Current Assets is @ Quick Assets. ® Total Assets. © Total Debts. © Capital Employed. 16, Which of the following is not true? @ ‘toss Profit = Revenue from Operations - Cost of Revenue from Operations. © Operating Profit = Revenue from Operations - Operating Cost. © Equity = Total Assets - Total Debts. @ Equity = Capital Employed + Debt. 11, Atransaction involving decrease in both Current Ratio and Quick Ratio is @ Sale of Non-current Asset for cash. ® Sale of Stock-in-Trade at loss. © Cash payment of a Non-current Liability. © |ssue of Bonus Shares. 18. Current Ratio of a firm is 2.5 : 1 and its Current Liabilities are & 4,00,000. Its Working Capital will be ® %6,00,000. ® %750,000. © %800000. @ 1400,000. 18. Non-current Assets of a firm are € 26,00,000, Current Assets are & 9,00,000 and Shareholders’ Funds are *21,50.000, Total debts of the firm will be © %4350,000. 21350000. © %21,50,000, @ %38,50,000. 2% Sincere Lt, has Proprietary Ratio of 259%. To maintain this ratio at 30%, management may ® Reduce Debt. @ Increase Current Assets. © Increase Equity. Either Increase Equity or Reduce Debt.An Aid to Accountancy~CBSE x), MCQ132 00,000; Current i 21+ Working Capital is&7,20,000;Tade Payables 4,000; ther Curent Libilties&, It Ratios at ® 4:1 © ssi @7:1 10,000. Current Ratio is eg 22. Current Assets are & 10,00,000; Inventories & 5,00,000; working Capital % 6, @ 25:1. O11 eC @ 1:2. 23. Which ratio is not a part of Solvency Ratio? ® Debt to Equity Ratio ® Current Ratio © Total Assets to Debt Ratio @ Proprietary Ratio 24. If Total Assets are & 3,50,000, Total Debts, ie, external debts are 7 1,00,000 and Current Liabilities are % 50,000, Debt-Equity Ratio will be @i:. ® 1:2 © 2:1. @© None of these. 25. Which of the following is not an Activity Ratio? @® Inventory Turnover Ratio © Working Capital Turnover Ratio 26. If Credit Revenue from Operations is € 7,00,000, Cash Revenue from Oper Revenue from Operations is € 6,40,000, then Gross Profit Ratio will be @® 15%. ® 18%. © 25%. @ 20%. 27. If Revenue from Operations is € 1,60,000 and Gross Profit is € 40,000, Gross Profit Ratio will be @® 30%. ® 25%. © 40%. @ 50%. 28. The Current Ratio ofa firm is 2: 1. The repayment of part of current liabilities will @ reduce Current Ratio. ® improve Current Ratio. © not change Current Ratio. @ None of these. Current Ratio of a firm is 3 : 1. The purchase of stock for cash will @® improve Current Ratio. ® reduce Curre io, © not change Current Ratio. @ None of these. Quick Ratio of a firm is 2: 1. Purchase of stock for cash will @® improve Quick Ratio. ® reduce Quick Ratio. © not change Quick Ratio. @ None of these. 31. Debt-Equity ratio is the relationship between @® Long-term Debts and Share Capital. © Long-term Debts and Total Assets. © Interest Coverage Ratio @ Trade Receivables Turnover Ratio (CBSE 2020) Ins is F 1,00,000. Cost of 29. 30. ® Long-term Debts and Shareholders’ Funds. @ Long-term Debts and Working Capital. Interest Coverage Ratio is the relationship between @ Net Profit and interest charge. Gross Profit and interest charge. Profit before interest and tax and interest on Long-term Borrowings. & Profit after interest and tax and interest on Long-term Borrowings. prye Choice Questions ie MCQ.133 ne correct formula for computing Operating Ratio is | Operating Cost | | | | ie from Operations ® fevenue from Operations, 99 Operating Cost . _Operating Cost fevenue from Operations * 0 ® Gross Profit Revenue from Operations * 1°" gevenve from Operations is € 9,00,000, Gross Profit is 25% on Cost, Operating Expenses are € 90,000, ” © 50%. @ 10%. | cifference between Revenue from Operations and Operating Profit is Profit. ® Operating Profit. Operating Cost. @® Net Profit before Tax. , ratio which is not a part of Profitability Ratio is Propriatary Ratio. © Gross Profit Ratio. ting Ratio. @ Net Profit Ratio. © of ‘om the following information, calculate Proprietary Ratio: Share Capital & 5,00,000, Non-Current Assets 10,000, Reserves and Surplus F 3,00,000, Current Assets € 10,00,000. 100% ® 70% @ 25% ‘The two basic measures of operational efficiency of a company are 7. F a ey @ Inventory Turnover Ratio and Working Capital Turnover Ratio. © Liquid Ratio and Operating Ratio. © Liquid Ratio and Current Ratio. @ Gross Profit Margin and Net Profit Margin. 39. Atransaction that increases Current Ratio but does not change Working Capital © Cash payment of Non-current Liability. @© Sale of Fixed Assets for Cash. (CBSE Sample Paper 2019) Lif Current Ratio is 2: 1 is iyi @ Purchase of goods on credit. © Payment to a Trade Creditor. 40. transaction that decreases Current Ratio and increases Quick Ratio is @ Purchase of Stock-in-Trade for cash. © Sale of Non-current Assets for Cash. © Sale of Stock-in-Trade at loss. @ Cash payment of Non-current Liability. 41, A transaction that increases both Current Ratio and Quick Ratio is | @ Purchase of Stock-in-Trade on Credit. © Sale of Stock at Loss. © Cash payment of Non-current Liability. @ Sale of Non-curtent Asset for Cash. 42. Name the difference between Capital Employed ar @® Shareholders’ Funds © Total Debts 43._ Profitability Ratio in relation to investment is ® Gross Profit Ratio. © Operating Ratio. ind Non-current Liabilities. © Capital Employed @ Total Assets @® Operating Profit Ratio. @ Return on Investment.= MCQ.134 An Aid to Accountancy — CBSE xy 44, Current Ratio of Vidur Pvt. Lid, is 3 : 2. Accountant wants to maintain it at 2 : 1. Following opti, are available: is () He can repay Bills Payable. (ii) He can purchase goods on credit. (iii) He can take short-term loan. Choose the correct option: @® Only (iis correct © Only (iis correct © Only (i) and (ii) are correct @ Only (ii) and (iii) are correct (CBSE Sample Paper 2020) 45. The objective of Current Ratio is @ to assess the firm's ability to meet its short-term liabilities on tir © to assess the ability of the firm to meet its Current Liabil © to assess the ability of the firm to meet its long-term liabilities. @ to measure the proportion of total assets funded by the shareholders. e. ies immediately. 46. The ratio that measures the relation between Operating Profit and Revenue from Operations is @ Operating Ratio. ® Operating Profit Ratio. © Gross Profit Ratio. @© Net Profit Ratio. 47. Which of the following is not correct? @® Equity = Capital Employed + Debt. ® Equity = Share Capital + Reserves and Surplus. © Debt = Long-term Borrowings + Long-term Provisions. @ Working Capital = Current Assets - Current Liabilities. 48. A transaction that does not change both Current Ratio and Quick Ratio is @® Sale of Stock-in-Trade at loss. ® Cash payment of a Non-current Liability. © ash received from trade debtors. @ Sale of furniture for cash. 49. The may indicate that the firm is experiencing stock outs and lost sales. @ Average Payment Period. © Inventory Turnover Ratio. © Average Collection Period. @ Quick Ratio. (CBSE Sample Paper 2020)