Financial Statements

Ratios

Medium

Financial Statements

The current ratio of a firm is 2 : 1. If the firm purchased goods on credit, then how will it affect its current ratio?

Improve

Reduce

No change

The ratio will increase for some time and reach its highest point.

✅ Correct Option: 2

Credit purchase increases stock, a current asset, and creditors, a current liability, by the same amount. Adding an equal figure to both numerator and denominator of a ratio greater than $1$ pulls it towards $1$ .

For example, with current assets $200$ and liabilities $100$ , a purchase of $100$ gives $\frac{300}{200} = 1.5$ . The ratio reduces.

2025: 3 June Shift 2

Compute Earning per share from following information

Net profit after tax but before dividend	1,75,000
Equity shares of Rs. 10 each	Rs. 7,00,000
Dividend declared @15%
Market price of a share	Rs.13

2025: 14 May Shift 1

_________ are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm.

2025: 3 June Shift 2

Calculate Gross profit ratio from following info

Revenue from operations	3,40,000
Cost of revenue from operations	1,20,000

2025: 22 May Shift 1

Given the following information:

Particulars	Amount (Rs.)
Revenue from Operations	3,40,000
Cost of Revenue from Operations	1,20,000
Selling expenses	80,000
Administrative Expenses	40,000

Calculate Operating ratio.

2022: 16 July Shift 2

Make the right combination of the ratios that enables to find the short term liquidity

A. Return on Equity

B. Acid Test Ratio

C. Sacrificing Ratio

D. Inventory Turnover Ratio

E. Current Ratio

Choose the correct answer from the options given below:

2022: 8 Aug Shift 2

Which one higher ratio is not favourable?

The current ratio of a firm is 2 : 1. If the firm purchased goods on credit, then how will it affect its current ratio?

Solution

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