What Is Operating Ratio And Solved Problems In Pdf

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It is also called the operating cost ratio or operating expense ratio.

Operational Efficiency Ratio: How to Calculate and Improve It

Classification of Accounting Ratios In view of the requirements of various users, the accounting ratios may be classified as under. Current ratio of is considered to be ideal. This ratio is a better indicator of liquidity and 1 : 1 is considered to be ideal. Items excluded in liquid assets are inventories, prepaid expenses. Items Included in Current Liabilities i Short-term borrowings. Solvency Ratios Solvency ratios judge the long-term financial position of an enterprise i.

It is computed to ascertain soundness of the long-term financial position of the firm. Generally, the ratio of 2 : 1 is considered as an ideal. The ideal coverage ratio is 6 to 7 times. Turnover or Performance or Activity Ratios These ratios measure how efficiently a company is using its assets to generate sales.

If information about opening balances of debtors and bills receivable is missing, then only closing debtors and bills receivable will be considered. Also, if credit sales are not specified, then total sales will be deemed to be on credit. The higher the ratio, the better it is. In the absence of opening creditors and bills payable, closing creditors and bills payable can be used in the above formula.

Also, if credit purchases are not given, then all purchases are deemed to be on credit. Profitability Ratios These ratios measure the profitability of a business assessing the and helps in overall efficiency of the business. Net profit ratio is an indicator of overall operational efficiency of the business. Operating profit ratio is an indicator of operational efficiency of the business. NOTE Since,non-operating assets are excluded while determining capital employed, income from non-operating assets should also be excluded from profit.

State with reason whether repayment of long-term loan will result in increase,decrease or no change of debt equity ratio. All India ; hots Ans. Therefore, the debt-equity ratio will decrease.

What will be the operating profit ratio, if operating ratio is Delhi Ans. All India Ans. State with reason whether the decrease in rent received by Rs 15, will increase, decrease or not change the ratio. Decrease in rent received by Rs 15, will not change the gross profit because rent received is a non-operating income.

The current ratio of a company is 3 : 1. State with reason, whether the payment of? After the payment of? Therefore, the current ratio will increase.

Quick ratio of a company is 1. State giving reason whether the ratio will improve, decline or not change on payment of dividend by the company. Delhi ; hots Ans. Ratio will increase as both the current assets and current liabilities will decrease on the payment of dividend. The inventory turnover ratio of a company is 3 times. Stock turnover ratio will decline because increase in the value of closing stock by? The debt-equity ratio of a company is 0.

State whether the long-term loan obtained by the company will improve, decrease or not change the ratio. OM Ltd has a current ratio of 3. If the excess of current assets over quick assets as represented by inventory is Rs 1,50,, calculate current assets and current liabilities. X Ltd has a current ratio of 3 : 1 and quick ratio of 2 If the excess of current assets over quick assets as represented by inventory is Rs 40,, calculate current assets and current liabilities.

Revenue from operations i. All India ; Modified Ans. On basis of the following information, calculate i Debt equity ratio ii Working capital turnover ratio Ans.

On the basis of the following information, calculate i Debt equity ratio ii Working capital turnover ratio Ans. The quick ratio of a company is 2 : 1. State giving reasons, for any four which of the following would improve, reduce or not change the ratio i Purchase of machinery for cash ii Purchase of goods on credit iii Sale of furniture at cost iv Sale of goods at a profit v Cash received from debtors Delhi c Ans.

The debt equity ratio of a company is state giving reasons, any four which of the following would improve, reduce or not change the ratio i Purchase, of machinery for cash ii Purchase of goods on credit iii Sale of furniture at cost iv Sale of goods at a profit v Redemption of debentures at a premium All India Ans.

Here,it is assumed that premium payable on redemption of debenture is written-off through existing securities premium. Calculate the total current assets and value of inventory. Delhi ; All India Ans. Assuming that the debt equity ratio is 2. State giving reasons whether this ratio would increase, decrease or remain unchanged in the following cases. Any four i Purchase of fixed assets on a credit of two months ii Purchase of fixed assets on long-term deferred payment basis iii Issue of new shares for cash iv Issue of bonus shares v Sale of fixed assets at a loss of 13, Delhi c Ans.

All india Ans. Calculate return on capital employed. Calculate the gross profit ratio. From the following information, calculate the following ratios i Liquid ratio ii Proprietary ratio Ans. From the following information, calculate any two of the following ratios i Liquid ratio ii Debt equity ratio Ans. From the following information, calculate any two of the following ratios i Net profit ratio ii Debt equity ratio Ans.

The quick ratio of a company is 1. State with reason which of the following transactions would a increase b decrease or c not change the ratio a Paid rent Rs 3, in advance. From the following calculate: i Operating profit ratio; and if Working capital turnover ratio Ans. Its liquid ratio is 1. Calculate quick assets and current assets. From the following information, calculate any two of the following ratios i Gross profit ratio ii Working capital turnover ratio iii Proprietary ratio Ans.

RD Sharma Class 12 Solutions. Watch Youtube Videos.

Operating Expenses – Definition, Example, Key Ratio

Updated on Jan 05, - PM. This ratio represents the final result of the company. Profitability represents final performance of company i. Return on Equity. Earnings Per Share. Dividend Per Share.

Important Questions for CBSE Class 12 Accountancy Classification of Accounting Ratios

Enroll in our online course The Accountant to learn more. Operating expenses are the costs associated with the core activities of a business. Many items are categorized as operating but all contribute towards the delivery of the final goods or services to customers. This is an important measure of financial performance for many analysts as it represents the earnings generated from the main activities of the business.

Even massive revenues can feel like a hollow victory if high expenses are taking a hefty bite out of your bottom line. They are variable, frequent, and generally include, but are not limited to:. Operating expenses can also include those expenses directly related to production, i.

Classification of Accounting Ratios In view of the requirements of various users, the accounting ratios may be classified as under. Current ratio of is considered to be ideal. This ratio is a better indicator of liquidity and 1 : 1 is considered to be ideal. Items excluded in liquid assets are inventories, prepaid expenses.

Operating Ratio

Accounting for Management

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1 Response
  1. Xanisalo1993

    You can check your reasoning as you tackle a problem using our interactive solutions viewer.

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