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Important Questions and Answers for Class 12 Accountancy Chapter 5 Accounting Ratios 2025-26

Q: 1. What are the most important questions from Class 12 Accountancy Chapter 5 – Accounting Ratios for CBSE exams?

Questions focusing on calculation, interpretation, and application of accounting ratios are frequently asked. These include current ratio, debt-equity ratio, return on investment, and trend analysis questions. Practice both numericals and case-based formats, as these are common in CBSE 2025–26 exams.

Q: 2. How should I answer 3-mark and 5-mark Accounting Ratios questions to match CBSE step marking?

Structure your answer with:Definition or formula firstStepwise calculation or explanationClear conclusion/interpretationUse key accounting terms. Label all workings for partial marks.

Q: 3. Is it compulsory to include diagrams or formats for full marks in Accounting Ratios important questions?

While diagrams are not usually required, clear presentation of formats—such as writing ratios in standard form and showing each step—helps earn full marks. Follow the textbook structure for tables and headings wherever possible.

Q: 4. Where can I find and download important questions with solutions as a PDF for Class 12 Accounting Ratios?

You can download a PDF of important Accounting Ratios questions with answers from Vedantu’s website. These PDFs cover all key topics, model solutions, and are based on the latest CBSE syllabus for effective last-minute revision.

Q: 5. How should I prioritise revision for high-weightage subtopics in Chapter 5?

Start with liquidity ratios, solvency ratios, profitability ratios, and their calculations. Next, focus on analysis-based questions and short notes. These areas usually carry higher marks and frequently appear in board exams.

Q: 6. What are common mistakes students make while answering important questions in Accounting Ratios?

Common errors include incorrect formulae, mislabelling numerators/denominators, or missing units. Always double-check calculations and interpretation—marks are often lost due to small presentation mistakes.

Q: 7. How can I use CBSE sample papers and previous years' trends to practice important questions for Accounting Ratios?

Practice sample papers and identify patterns in question types. Focus on recurring formats like ratio analysis, interpretation, and MCQs. This helps you cover expected questions and boosts speed for the exam.

Class 12 Accounting Ratios Questions Solutions PDF for Practice and Exams

Explore Important Questions Class 12 Accountancy Part 2 Chapter 5 Accounting Ratios on this page. Get class 12 accounting ratios questions solutions pdf styled for actual CBSE exams. These questions and answers are perfect for students who want to revise key topics before tests.

This chapter covers all the core concepts of accounting ratios for Class 12 Accountancy. You will find practical questions as well as class 12 accounting ratios solutions that match board exam patterns. Use these to practice calculation, definitions, and short answers.

Every question is designed to help you understand and remember what’s important for exams. Check detailed, stepwise Vedantu’s Important Questions with Answers and easily download the free PDF to study offline anytime. Start improving your scores now with expert support made simple.

Class 12 Accounting Ratios Questions Solutions PDF for Practice and Exams

1. Multiple choice questions.

Q1. Which of the following ratios assesses a firm's ability to meet its short-term obligations?

(a) Debt-Equity Ratio
(b) Current Ratio
(c) Inventory Turnover Ratio
(d) Return on Capital Employed

Answer: (b) Current Ratio.

Q2. If current assets are ₹2,00,000 and current liabilities are ₹1,00,000, what is the current ratio?

(a) 1:2
(b) 0.5:1
(c) 2:1
(d) 1:1

Answer: (c) 2:1.

Q3. Operating Profit Ratio is classified under which type of ratios?

(a) Liquidity Ratios
(b) Solvency Ratios
(c) Profitability Ratios
(d) Activity Ratios

Answer: (c) Profitability Ratios.

Q4. The formula for Quick Ratio (Acid-Test Ratio) is:

(a) Current Assets / Current Liabilities
(b) (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities
(c) Net Profit / Capital Employed
(d) Revenue from Operations / Average Inventory

Answer: (b) (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities.

2. Very Short Answer (VSA).

Q1. Define Ratio Analysis.

Answer: Ratio Analysis is the study of numerical relationships between two accounting figures, calculated to evaluate financial performance such as profitability, liquidity, solvency, and efficiency.

Q2. What is the ideal value of the Current Ratio?

Answer: The ideal Current Ratio is generally considered to be 2:1, indicating that current assets should be twice the current liabilities.

Q3. List any two limitations of accounting ratios.

Answer: Two limitations are: ratios use accounting data that may be biased or inaccurate, and they do not consider qualitative factors.

Q4. Name one solvency ratio.

Answer: Debt-Equity Ratio is an example of a solvency ratio.

3. Short Answer Questions.

Q1. Explain the significance of liquidity ratios in business decision-making.

Answer: Liquidity ratios such as the Current Ratio and Quick Ratio measure a firm’s short-term financial health. They help stakeholders assess whether the business can pay its immediate obligations, preventing insolvency and guiding decisions like granting credit facilities.

Q2. Describe the steps to calculate Gross Profit Ratio and explain its importance.

Answer: To calculate Gross Profit Ratio: (1) Find Gross Profit = Revenue from Operations - Cost of Operations. (2) Apply the formula: Gross Profit Ratio = (Gross Profit / Revenue from Operations) × 100. It shows how efficiently the firm produces its goods compared to sales.

Q3. How does Ratio Analysis simplify complex financial information for stakeholders?

Answer: Ratio analysis condenses vast financial statement data into simple relationships, like percentages or ratios, helping stakeholders quickly understand trends and evaluate performance without analyzing every account detail.

Q4. Mention three advantages of using profitability ratios for a business.

Answer: Profitability ratios help in assessing earning efficiency, identifying areas of improvement in operations, and supporting intra-firm and inter-firm comparisons to make informed decisions for growth.

Q5. Give the formula of Inventory Turnover Ratio and explain its meaning.

Answer: Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory. It indicates how many times inventory is sold and replaced during the year, reflecting inventory management efficiency.

4. True or False Questions.

Q1. Ratio analysis is only useful for historical comparisons and cannot aid in forecasting.

Answer: False.

Q2. Operating Profit Ratio belongs to the category of Activity Ratios.

Answer: False.

Q3. The Quick Ratio excludes inventory and prepaid expenses from current assets.

Answer: True.

Q4. Debt-Equity Ratio is a type of solvency ratio.

Answer: True.

3. Fill in the Blanks Questions.

Q1. Gross Profit Ratio is calculated as ______ divided by Revenue from Operations.

Answer: Gross Profit

Q2. The ideal Current Ratio accepted in business is ______.

Answer: 2:1

Q3. The formula for Inventory Turnover Ratio is Cost of Revenue from Operations divided by ______.

Answer: Average Inventory

Q4. ______ ratios measure a company’s ability to meet long-term financial obligations.

Answer: Solvency

Q5. ______ analysis is used to highlight areas requiring managerial attention in a business.

Answer: Ratio

Why Understanding Accounting Ratios Strengthens Financial Decision-Making

Explore accounting ratios class 12 important questions to connect theory with real-world practice. With well-designed class 12 accounting ratios solutions, you gain a stronger grasp on financial statements. Learning through these questions helps you confidently handle CBSE and NCERT exam concepts with clarity.

Our curated class 12 accounting ratios questions solutions pdf and DK Goel reference explanations strengthen your basics. You’ll see stepwise answers and examples exactly as needed for school tests and board assessment, based on core concepts and formulas of Ratio Analysis.

If you’re searching for accounting ratios class 12 pdf or class 12 accountancy chapter 5 solutions, this guide makes revision easy. Clear structure and explanations help you prepare for any question, whether it’s theory, calculation, or interpretation in the board exam.

FAQs on Important Questions and Answers for Class 12 Accountancy Chapter 5 Accounting Ratios 2025-26

1. What are the most important questions from Class 12 Accountancy Chapter 5 – Accounting Ratios for CBSE exams?

Questions focusing on calculation, interpretation, and application of accounting ratios are frequently asked. These include current ratio, debt-equity ratio, return on investment, and trend analysis questions. Practice both numericals and case-based formats, as these are common in CBSE 2025–26 exams.

2. How should I answer 3-mark and 5-mark Accounting Ratios questions to match CBSE step marking?

Structure your answer with:

Definition or formula first
Stepwise calculation or explanation
Clear conclusion/interpretation

Use key accounting terms. Label all workings for partial marks.

3. Is it compulsory to include diagrams or formats for full marks in Accounting Ratios important questions?

While diagrams are not usually required, clear presentation of formats—such as writing ratios in standard form and showing each step—helps earn full marks. Follow the textbook structure for tables and headings wherever possible.

4. Where can I find and download important questions with solutions as a PDF for Class 12 Accounting Ratios?

You can download a PDF of important Accounting Ratios questions with answers from Vedantu’s website. These PDFs cover all key topics, model solutions, and are based on the latest CBSE syllabus for effective last-minute revision.

5. How should I prioritise revision for high-weightage subtopics in Chapter 5?

Start with liquidity ratios, solvency ratios, profitability ratios, and their calculations. Next, focus on analysis-based questions and short notes. These areas usually carry higher marks and frequently appear in board exams.

6. What are common mistakes students make while answering important questions in Accounting Ratios?

Common errors include incorrect formulae, mislabelling numerators/denominators, or missing units. Always double-check calculations and interpretation—marks are often lost due to small presentation mistakes.

7. How can I use CBSE sample papers and previous years' trends to practice important questions for Accounting Ratios?

Practice sample papers and identify patterns in question types. Focus on recurring formats like ratio analysis, interpretation, and MCQs. This helps you cover expected questions and boosts speed for the exam.