Class 12 Accountancy — Chapter 5: Accounting Ratios

What you'll learn

• ▸Meaning and Objectives of Accounting Ratios
• ▸Advantages and Limitations of Ratio Analysis
• ▸Classification of Ratios
• ▸Liquidity Ratios
• ▸Solvency Ratios
• ▸Activity (Turnover) Ratios
• ▸Profitability Ratios
• ▸Types of Ratio Comparison

Chapter Summary

--- PAGE 1 --- 12128CH05 Accounting Ratios 5 Financial statements aim at providing financial information about a business enterprise to meet the information needs of the decision-makers. Financial statements prepared by a business enterprise in the corporate sector are published and are available to the decision-makers. These statements provide financial data which require analysis, comparison and interpretation for taking decision by the external as well as internal users of accounting information. This act is termed as financial statement analysis. It is regarded as an integral and important part of accounting. As indicated in the previous chapter, the most commonly used techniques of financial statements analysis are comparative statements, common size statements, trend analysis, accounting ratios and cash flow analysis. The first three have been discussed in detail in the previous chapt…

Practice Questions from this Chapter

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1. Explain how ratios help businesses. Get Solution →
2. Compare financial statements for me. Get Solution →
3. Show a daily life ratio example. Get Solution →
4. What is the term for the analysis, comparison, and interpretation of financial data provided in financial statements? Get Solution →
5. An accounting ratio, which shows the relationship between two accounting numbers, can be expressed in which of the following ways? Get Solution →
6. What is a primary objective of ratio analysis as stated in the chapter? Get Solution →
7. Comparing a firm's performance over several accounting periods is known as what? Get Solution →
8. The accounting assumption that implicitly causes financial statements to ignore price-level changes is called the: Get Solution →

Did you know?

• 💡 Ancient Egyptians used hieroglyphs to record business transactions and track wealth.
• 💡 The Golden Ratio, a special number, appears naturally in flowers, shells, and even art.
• 💡 Early human counting began with fingers, pebbles, and marks on bones or wood.
• 💡 The Abacus, an ancient calculating tool, was invented thousands of years ago in Mesopotamia.
• 💡 A single snowflake can have over 100 quintillion molecules of water.

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