## CBSE Accountancy Chapter 5 Accounting Ratios Class 12 Notes - FREE PDF Download

## FAQs on Accounting Ratios Class 12 Notes: CBSE Accountancy Chapter 5

1. What are accounting ratios in Chapter 5 Accountancy?

Accounting ratios show the relationship between different financial numbers in a company's reports. They help evaluate a business's performance and financial health. These ratios can be shown as fractions, percentages, or multiples. They help stakeholders make informed decisions.

2. Why are liquidity ratios important in Accounting Ratios notes?

Liquidity ratios measure a company's ability to pay its short-term debts. They show whether a business can meet its immediate financial obligations. High liquidity ratios mean good financial health and efficient cash management. They give investors and creditors confidence about the company's short-term stability.

3. What is the difference between the current ratio and the quick ratio in Chapter 5?

The current ratio includes all current assets like inventory, receivables, and cash, divided by current liabilities. The quick ratio excludes inventory and only includes cash and receivables. The quick ratio provides a stricter test of liquidity by focusing on the most liquid assets.

4. How do solvency ratios help in financial analysis?

In Accounting Ratios Class 12 Notes, solvency ratios measure a company's ability to meet long-term obligations. They compare total liabilities to total assets or equity. These ratios are important for investors and creditors to assess the risk of investing in or lending to the company. They show the company's long-term financial health.

5. What does the inventory turnover ratio indicate in Accounting Ratios Class 12 notes?

The inventory turnover ratio shows how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold by the average inventory. A higher ratio indicates that inventory is sold and replaced frequently, which is good for business. It helps understand sales performance and inventory control.

6. Why should students use revision notes for Chapter 5 Accounting Ratios Class 12 Notes?

Revision notes provide a quick summary of key concepts and formulas, making it easier to review before exams. They help in refreshing memory and understanding of the main topics without reading the entire textbook. These notes highlight crucial information for effective study.

7. How can profitability ratios be useful in Accounting Ratios Class 12 Notes?

Profitability ratios assess a company's ability to generate profit relative to its revenue, assets, or equity. They include net profit margin, return on assets, and return on equity. These ratios show how efficiently the company is making profits from its operations. They provide insights into the overall financial performance.

8. What is the formula for the return on investment (ROI) ratio in Accounting Ratios Class 12 notes PDF?

The ROI ratio is calculated as (Net Profit / Total Investment) x 100. This ratio measures the profitability of investments made by the company. It shows how effectively the company uses its invested capital to generate profits. A higher ROI means better investment returns.

9. How can Vedantu's notes help in understanding accounting ratios from Accounting Ratios Class 12 notes PDF?

Vedantu’s notes simplify complex topics into easy-to-understand parts. They provide clear explanations, examples, and step-by-step calculations of various ratios. These notes help students quickly grasp the concepts. Using Vedantu’s notes can improve understanding and exam performance.

10. What are the benefits of using flashcards for studying Accounting Ratios Class 12 notes PDF?

Flashcards help memorize important formulas, definitions, and concepts. They promote active recall, which helps retain information longer. Flashcards are portable, making it easy to study anywhere. They also facilitate quick reviews and self-testing, essential for effective learning.

11. How often should students review their revision notes of Chapter 5 Accountancy?

Students should regularly review their revision notes of Accounting Ratios Class 12 notes PDF, to reinforce understanding and retention. Weekly reviews help maintain familiarity with the material. Closer to exams, daily reviews are beneficial. Consistent revision ensures the information stays fresh in memory.

12. What types of questions are commonly asked about accounting ratios in exams?

Exam questions often include calculating ratios like current ratio, quick ratio, debt to equity ratio, and profitability ratios. Students may also interpret these ratios and discuss their importance. Case studies requiring ratio analysis in real-life scenarios are common. Understanding these questions helps in thorough preparation and better exam performance while referring Accounting Ratios Class 12 notes PDF.