CUET UG Categorised PYQ Accountancy Unit 9 -

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CUET UG Categorised PYQ Accountancy Unit 9

Accountancy

⏱️ 30 Minutes

❓ 20 Questions

📅 2022, 2023, 2024 & 2025

✍️ Long Answers

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Categorised PYQ Accountancy Unit 9

1 / 20

QUESTION 1 OF 20

Match List I with List II

List I	List II
A. Operating Profit Ratio	I. Solvency Ratios
B. Working Capital Turnover Ratio	II. Liquidity Ratios
C. Debt-Equity Ratio	III. Activity Ratios
D. Quick Ratio	IV. Profitability Ratios

Answer Review

1 Match List I with List II

List I	List II
A. Operating Profit Ratio	I. Solvency Ratios
B. Working Capital Turnover Ratio	II. Liquidity Ratios
C. Debt-Equity Ratio	III. Activity Ratios
D. Quick Ratio	IV. Profitability Ratios

A A-III, B-IV, C-II, D-I

B A-III, B-IV, C-I, D-II

C A-IV, B-III, C-II, D-I

D A-IV, B-III, C-I, D-II

💡 Short Explanation

Profitability ratios measure earning efficiency. Activity ratios measure asset utilization efficiency. Solvency ratios measure long-term financial stability. Liquidity ratios measure short-term payment capacity.

✅ Correct Answer Explanation

(Detailed) → A-IV: Operating Profit Ratio measures operating profit generated from sales and is therefore a Profitability Ratio. → B-III: Working Capital Turnover Ratio measures how efficiently working capital is used to generate sales and is an Activity Ratio. → C-I: Debt-Equity Ratio evaluates long-term financial solvency by comparing debt with shareholders' funds and is a Solvency Ratio. → D-II: Quick Ratio measures immediate liquidity by excluding inventory and is a Liquidity Ratio. Therefore: A-IV, B-III, C-I, D-II.

❓ Why Other Options Are Incorrect

A) A-III, B-IV, C-II, D-I
Incorrectly classifies Operating Profit Ratio and Quick Ratio.
B) A-III, B-IV, C-I, D-II
Incorrectly classifies Operating Profit Ratio and Working Capital Turnover Ratio.
C) A-IV, B-III, C-II, D-I
Swaps Debt-Equity Ratio and Quick Ratio classifications.

🎯 Strategy

Used

Elimination
Operating Profit → Profitability.
Quick Ratio → Liquidity.
This leaves only Option D.

🧠 Memory Trick

Liquidity → Quick Ratio

📚 Class XII, Accountancy Part II, Chapter 4: Analysis of Financial Statements (Accounting Ratios).

2 __________ is a measure of liquidity which excludes __________.
A. Liquid Ratio
B. Current Ratio
C. Debt Equity Ratio
D. Inventory
E. Debtor
Choose the correct answer from the options given below: (PYQ 2023)

A A and D only

B B and E only

C C and D only

D D and E only

💡 Short Explanation

Liquid Ratio measures immediate liquidity. It excludes Inventory from current assets. Inventory is not readily convertible into cash.

✅ Correct Answer Explanation

(Detailed) The Liquid Ratio (Quick Ratio) is a measure of short-term liquidity. It is calculated as: Liquid Ratio = Liquid Assets / Current Liabilities Liquid Assets include all current assets except: • Inventory • Prepaid Expenses Inventory is excluded because it generally takes more time to convert into cash than debtors, cash, or marketable securities. Therefore: A = Liquid Ratio D = Inventory Hence, the correct answer is A and D only.

❓ Why Other Options Are Incorrect

B) B and E only
Current Ratio includes Debtors.
C) C and D only
Debt Equity Ratio is a solvency ratio.
D) D and E only
Inventory and Debtors are assets, not liquidity measures.

🎯 Strategy

Used

Substitution
Liquid Assets = Current Assets − Inventory − Prepaid Expenses

🧠 Memory Trick

Liquid Ratio excludes Inventory and Prepaids.

📚 Class 12, Accountancy Part 2, Chapter 4: Analysis of Financial Statements.

3 Match List I with List II

List I	List II
A. Liquidity Ratio	I. Proprietary Ratio
B. Solvency Ratio	II. Trade Receivable Turnover Ratio
C. Activity Ratio	III. Operating Ratio
D. Profitability Ratio	IV. Current Ratio

A A-I, B-IV, C-III, D-II

B A-III, B-IV, C-I, D-II

C A-IV, B-I, C-II, D-III

D A-IV, B-II, C-I, D-III

💡 Short Explanation

Liquidity → Current Ratio. Solvency → Proprietary Ratio. Activity → Trade Receivable Turnover Ratio. Profitability → Operating Ratio.

✅ Correct Answer Explanation

(Detailed) Correct matching: A. Liquidity Ratio → IV. Current Ratio B. Solvency Ratio → I. Proprietary Ratio C. Activity Ratio → II. Trade Receivable Turnover Ratio D. Profitability Ratio → III. Operating Ratio Therefore: A-IV, B-I, C-II, D-III.

❓ Why Other Options Are Incorrect

A)
Proprietary Ratio is not a liquidity ratio.
B)
Operating Ratio is not a liquidity ratio.
D)
Trade Receivable Turnover is an activity ratio, not solvency.

🎯 Strategy

Used

Option Grouping
Liquidity → Current
Solvency → Proprietary
Activity → Turnover
Profitability → Operating

🧠 Memory Trick

L-C, S-P, A-T, P-O

📚 Class 12, Accountancy Part 2, Chapter 4: Analysis of Financial Statements.

4 Match List I with List II

List I	List II
A. Current Liabilities + Working Capital	I. Capital Employed
B. Shareholders Fund + Debts	II. Operating Cost
C. Operating Expenses + Cost of Revenue from Operation	III. Current Assets
D. Net Profit + Non Operating Expenses (−) Non Operating Income	IV. Operating Profit

A A-I, B-II, C-III, D-IV

B A-IV, B-III, C-II, D-I

C A-III, B-I, C-II, D-IV

D A-I, B-III, C-IV, D-II

💡 Short Explanation

Current Assets = Current Liabilities + Working Capital. Capital Employed = Shareholders' Funds + Debt. Operating Cost = Revenue Cost + Operating Expenses. Operating Profit adjusts non-operating items.

✅ Correct Answer Explanation

(Detailed) Correct matching: A → III Current Assets B → I Capital Employed C → II Operating Cost D → IV Operating Profit Hence: A-III, B-I, C-II, D-IV.

❓ Why Other Options Are Incorrect

They mismatch standard accounting formulas and definitions.

🎯 Strategy

Used

Formula Verification
CA = CL + WC
Capital Employed = Equity + Debt

🧠 Memory Trick

Assets = Liabilities + Working Capital

📚 Class 12, Accountancy Part 2, Chapter 4: Accounting Ratios.

5 Match List-I with List-II.

List-I	List-II
A. Test of Activity	I. Acid Test Ratio
B. Test of Liquidity	II. Debt Equity Ratio
C. Test of Solvency	III. Debtor Turnover Ratio
D. Test of Profitability	IV. Return on Investment Ratio

A (A)- (III), (B) - (I), (C) - (II), (D) - (IV)

B (A)-(I), (B) - (II), (C) - (III), (D) - (IV)

C (A)-(IV), (B) - (III), (C) - (II), (D) - (I)

D (A)-(I), (B) - (IV), (C) - (III), (D) - (II)

💡 Short Explanation

Activity ratios measure efficiency (Turnover). Liquidity ratios measure short-term ability (Acid Test). Solvency ratios measure long-term ability (Debt-Equity). Profitability ratios measure earning capacity (ROI).

✅ Correct Answer Explanation

(Detailed) Ratios are categorized by their purpose: Activity/Efficiency Ratios: • Debtor Turnover Ratio measures how quickly receivables are converted to cash. Liquidity Ratios: • Acid Test Ratio (Quick Ratio) measures the ability to meet immediate current liabilities. Solvency Ratios: • Debt-Equity Ratio assesses the long-term financial structure and ability to pay long-term debts. Profitability Ratios: • ROI measures the overall return earned on the capital employed.

❓ Why Other Options Are Incorrect

B)
Incorrectly matches Activity with Acid Test and Liquidity with Debt-Equity.
C)
Incorrectly matches Activity with ROI and Liquidity with Debtor Turnover.
D)
Incorrectly matches Activity with Acid Test and Solvency with Turnover.

🎯 Strategy

Used

Option Grouping
Activity = Turnover
Liquidity = Acid Test
Solvency = Debt-Equity
Profitability = ROI

🧠 Memory Trick

Liquidity is Liquid (Acid); Activity is Active (Turnover)

📚 Class 12, Accountancy Part II, Chapter 4: Analysis of Financial Statements (Accounting Ratios).

6 Which of the following ratios are computed for evaluating solvency of the business?

A (A), (B) and (D) only

B (A), (B) and (C) only

C (A), (B), (C) and (D)

D (B), (C) and (D) only

💡 Short Explanation

Solvency ratios check long-term financial health. Proprietary Ratio, Interest Coverage Ratio and Total Asset to Debt Ratio are solvency ratios. Fixed Asset Turnover Ratio is an activity ratio.

✅ Correct Answer Explanation

(Detailed) Solvency ratios indicate whether a firm can meet its long-term obligations. • Proprietary Ratio → Solvency Ratio • Interest Coverage Ratio → Solvency Ratio • Total Asset to Debt Ratio → Solvency Ratio • Fixed Asset Turnover Ratio → Activity Ratio Therefore, the correct combination is: (A), (B) and (C) only.

❓ Why Other Options Are Incorrect

A) (A), (B) and (D) only
Includes Fixed Asset Turnover Ratio, which is an Activity Ratio.
C) (A), (B), (C) and (D)
Includes Fixed Asset Turnover Ratio incorrectly.
D) (B), (C) and (D) only
Excludes Proprietary Ratio and includes Fixed Asset Turnover Ratio.

🎯 Strategy

Used

Odd One Out
Fixed Asset Turnover Ratio belongs to Activity Ratios.
Remove it from the list.

🧠 Memory Trick

Turnover = Activity, not Solvency

📚 Class 12, Accountancy Part II, Chapter 4: Accounting Ratios, Section: Solvency Ratios.

7 Which of the following are the Profitability Ratios:

A (A), (B) and (D) only

B (A), (B) and (C) only

C (A), (B), (C) and (D)

D (B), (C) and (D) only

💡 Short Explanation

Profitability ratios measure earning performance. ROI, P/E Ratio and EPS relate to profits and returns. Debt Equity Ratio is a solvency ratio.

✅ Correct Answer Explanation

(Detailed) Profitability ratios evaluate the firm's ability to generate income. • Return on Investment (ROI): Measures earning power on capital employed. • Price Earning Ratio (P/E): Relates market price per share to earnings per share. • Earning per Share (EPS): Shows profit available to each equity share. Debt Equity Ratio is a solvency ratio because it measures the relationship between debt and shareholders' funds. Therefore, the correct answer is: (B), (C) and (D) only.

❓ Why Other Options Are Incorrect

A) (A), (B) and (D) only
Includes Debt Equity Ratio.
B) (A), (B) and (C) only
Includes Debt Equity Ratio and excludes EPS.
C) (A), (B), (C) and (D)
Incorrectly includes Debt Equity Ratio.

🎯 Strategy

Used

Elimination
Debt Equity Ratio belongs to Solvency Ratios.
Eliminate all options containing Debt Equity Ratio.

🧠 Memory Trick

Profitability = Earnings & Returns; Solvency = Debt

📚 Class 12, Accountancy Part II, Chapter 4: Accounting Ratios, Section: Profitability Ratios.

8 From the following details, calculate Interest Coverage Ratio:
Net Profit after Tax ₹1,80,000; 15% Long-term Debt ₹20,00,000; and Tax Rate 40%: (PYQ 2024)

A 4 times

B 2 times

C 6 times

D 8 times

💡 Short Explanation

Formula: Interest Coverage Ratio = Net Profit before Interest and Tax ÷ Interest Calculate PBT first. Add back interest.

✅ Correct Answer Explanation

(Detailed) → Step 1: Calculate Profit Before Tax (PBT) PBT = ₹1,80,000 ÷ (1 − 0.40) = ₹1,80,000 ÷ 0.60 = ₹3,00,000 → Step 2: Calculate Interest Interest = 15% of ₹20,00,000 = ₹3,00,000 → Step 3: Calculate Profit Before Interest and Tax (PBIT) PBIT = PBT + Interest = ₹3,00,000 + ₹3,00,000 = ₹6,00,000 → Step 4: Calculate Interest Coverage Ratio Interest Coverage Ratio = ₹6,00,000 ÷ ₹3,00,000 = 2 times

❓ Why Other Options Are Incorrect

A) 4 times
Uses incorrect profit figure.
C) 6 times
Mathematical error.
D) 8 times
Not supported by the given data.

🎯 Strategy

Used

Dimensional Analysis / Calculation
Calculate PBT.
Add Interest.
Divide by Interest.

🧠 Memory Trick

ICR = Before Interest, Before Tax

📚 Class 12, Accountancy Part II, Chapter 4: Accounting Ratios, Section: Solvency Ratios.

9 Calculate Trade Receivables Turnover Ratio.
Particulars:
Revenue from Operations = ₹8,75,000
Trade Debtors = ₹59,000
(PYQ 2024)

A 8.18 times

B 8.23 : 1

C 8.18%

D 8.81 : 1

💡 Short Explanation

Formula: Net Credit Revenue from Operations ÷ Average Trade Receivables Trade Receivables = Debtors + Bills Receivable. Ratio is expressed in "times."

✅ Correct Answer Explanation

(Detailed) → Step 1: Identify Revenue from Operations = ₹8,75,000 (Assumed all credit sales as no cash information is given.) → Step 2: Calculate Trade Receivables Trade Debtors = ₹59,000 Bills Receivable = ₹48,000 Trade Receivables = ₹59,000 + ₹48,000 = ₹1,07,000 → Step 3: Apply Formula Trade Receivables Turnover Ratio = ₹8,75,000 ÷ ₹1,07,000 = 8.1775 ≈ 8.18 times

❓ Why Other Options Are Incorrect

B) 8.23 : 1
Incorrect calculation and incorrect unit.
Turnover ratios are expressed in times.
C) 8.18%
Incorrect unit.
Turnover ratios are not percentages.
D) 8.81 : 1
Incorrect calculation and incorrect unit.

🎯 Strategy

Used

Dimensional / Unit Analysis
Turnover ratios must be expressed in times.
Final Answer → A

🧠 Memory Trick

Total Revenue over Total Receivables

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Activity/Turnover Ratios).

10 Calculate Average Collection Period.
Particulars:
Revenue from Operations = ₹8,75,000
Trade Debtors = ₹59,000
(PYQ 2024)

A 30 days

B 60 days

C 45 days

D 15 days

💡 Short Explanation

Formula: Days in a Year ÷ Trade Receivables Turnover Ratio Measures the time taken to collect cash from debtors.

✅ Correct Answer Explanation

(Detailed) Average Collection Period = 365 days ÷ 8.18 = 44.62 days ≈ 45 days (Alternatively, if 360 days are used:) 360 ÷ 8.18 ≈ 44 days This also points to 45 days as the closest answer.

❓ Why Other Options Are Incorrect

A) 30 days
Would require a turnover ratio of approximately 12 times.
B) 60 days
Would require a turnover ratio of approximately 6 times.
D) 15 days
Would require a turnover ratio of approximately 24 times.

🎯 Strategy

Used

Contextual Matching
Use the answer from Question 9 (8.18 times).
Apply the Average Collection Period formula.
Choose the closest option.

🧠 Memory Trick

Year ÷ Ratio = Time

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios.

11 Calculate Trade Payables Turnover Ratio.
Particulars:
Purchases = ₹4,20,000
Creditors = ₹90,000
(PYQ 2024)

A 29.6 times

B 2.96 times

C 29.6%

D 2.69 : 1

💡 Short Explanation

Formula: Net Credit Purchases ÷ Average Trade Payables. Trade Payables = Creditors + Bills Payable. Like the receivables ratio, this is expressed in "times."

✅ Correct Answer Explanation

(Detailed) → Step 1: Identify Net Credit Purchases = ₹4,20,000 (Assumed all credit as no cash purchase information is given.) → Step 2: Calculate Trade Payables Creditors = ₹90,000 Bills Payable = ₹52,000 Trade Payables = ₹90,000 + ₹52,000 = ₹1,42,000 → Step 3: Apply Formula Trade Payables Turnover Ratio = ₹4,20,000 ÷ ₹1,42,000 = 2.9577 ≈ 2.96 times

❓ Why Other Options Are Incorrect

A) 29.6 times
Incorrect decimal placement during calculation.
C) 29.6%
Incorrect unit; turnover ratios are not expressed as percentages.
D) 2.69 : 1
Incorrect calculation and incorrect unit (proportion format is used for liquidity/solvency ratios).

🎯 Strategy

Used

Dimensional/Unit Analysis
"Turnover" ratios must be expressed in "times," eliminating C and D.
Estimate: 420 ÷ 142 ≈ 3.
2.96 is the closest value to 3.
Final Answer → B.

🧠 Memory Trick

P-P: Purchases over Payables.

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Activity/Turnover Ratios).

12 Calculate Average Payment Period.
Particulars:
Purchases = ₹4,20,000
Creditors = ₹90,000
(PYQ 2024)

A 123 days

B 121 days

C 132 days

D 133 days

💡 Short Explanation

Formula: Days in a Year ÷ Trade Payables Turnover Ratio. Indicates the average time taken by the firm to pay its creditors.

✅ Correct Answer Explanation

(Detailed) Average Payment Period = 365 days ÷ 2.96 = 123.31 days ≈ 123 days The closest whole number provided in the options is 123 days.

❓ Why Other Options Are Incorrect

B) 121 days
Calculation error; 365 ÷ 2.96 does not result in 121.
C) 132 days
Incorrect calculation (likely a digit transposition).
D) 133 days
Result of using a different day count, which is non-standard.

🎯 Strategy

Used

Contextual Matching
Divide 365 by 2.96.
The result is approximately 123.31.
Final Answer → A.

🧠 Memory Trick

Higher Turnover = Lower Payment Period (Inverse Relationship).

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios.

13 Trade Receivables Turnover Ratio and Trade Payables Turnover Ratio are categorised as: (PYQ 2024)

A Liquidity Ratio

B Solvency Ratio

C Activity Ratio

D Profitability Ratio

💡 Short Explanation

These ratios measure the efficiency of asset/liability management. Also known as Turnover or Efficiency Ratios. They indicate how actively the business is operating its components.

✅ Correct Answer Explanation

(Detailed) Activity Ratios (or Turnover Ratios) measure the efficiency with which a firm uses its resources. • Trade Receivables Turnover Ratio indicates how quickly credit is collected. • Trade Payables Turnover Ratio indicates how quickly creditors are paid. Both focus on the speed or activity of the business cycle. Therefore, they are categorised as Activity Ratios.

❓ Why Other Options Are Incorrect

A) Liquidity Ratio
Liquidity Ratios measure the firm's ability to meet short-term obligations, not the speed of turnover.
B) Solvency Ratio
Solvency Ratios measure long-term financial health and ability to pay long-term debts.
D) Profitability Ratio
Profitability Ratios measure the earning capacity of the firm.

🎯 Strategy

Used

Option Grouping
"Turnover" is the keyword.
Turnover Ratios are synonymous with Activity Ratios.
Final Answer → C.

🧠 Memory Trick

Action/Activity: If it's turning over, it's active.

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Classification of Ratios).

14 A firm has Current Assets ₹2,50,000 and Current Liabilities ₹1,00,000. Find the Current Ratio. (PYQ 2024)

A 1.5 : 1

B 2 : 1

C 2.5 : 1

D 3 : 1

💡 Short Explanation

Current Ratio measures short-term solvency. Formula: Current Assets ÷ Current Liabilities. Ratio of Total Current Assets to Total Current Liabilities.

✅ Correct Answer Explanation

(Detailed) Current Ratio = Current Assets ÷ Current Liabilities = ₹2,50,000 ÷ ₹1,00,000 = 2.5 Therefore, the Current Ratio is: 2.5 : 1

❓ Why Other Options Are Incorrect

A) 1.5 : 1
Incorrect division result.
B) 2 : 1
Incorrect division result.
D) 3 : 1
Incorrect division result.

🎯 Strategy

Used

Dimensional/Unit Analysis
Apply the formula:
CA ÷ CL
= 2.5 ÷ 1
= 2.5 : 1
Final Answer → C.

🧠 Memory Trick

"Top Assets, Bottom Liabilities."

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios.

15 Based on the following information of a company as at 31 March, 2017, answer the question.

Items	₹
Inventory	1,00,000
Total Current Assets	1,60,000
Shareholders Fund	4,00,000
13% Debentures	3,00,000
Current Liabilities	1,00,000
Net Profit before Tax	3,51,000
Cost of Revenue from Operations	5,00,000

Question: What will be the Current Ratio of the company? (PYQ 2025)

A 16 times

B 2.6 : 1

C 2 : 1

D 1.6 : 1

💡 Short Explanation

Current Ratio measures short-term solvency. Formula: Current Assets ÷ Current Liabilities. Standard ideal ratio is 2 : 1.

✅ Correct Answer Explanation

(Detailed) The Current Ratio is calculated by dividing Total Current Assets by Current Liabilities. • Current Assets = ₹1,60,000 (Given) • Current Liabilities = ₹1,00,000 (Given) Calculation: = ₹1,60,000 ÷ ₹1,00,000 = 1.6 Therefore, the Current Ratio is: 1.6 : 1

❓ Why Other Options Are Incorrect

A) 16 times
Incorrect unit.
Current Ratio is expressed as a proportion (x : 1), not in times.
B) 2.6 : 1
Incorrect calculation.
May result from adding unrelated figures.
C) 2 : 1
This is the ideal ratio, but it does not match the given data.

🎯 Strategy

Used

Dimensional/Unit Analysis
Formula Application:
Current Assets ÷ Current Liabilities
= 1.6L ÷ 1.0L
= 1.6
Option D matches the mathematical result.
Final Answer → D.

🧠 Memory Trick

"Current over Current" (Assets on top, Liabilities on bottom).

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Section: Liquidity Ratios).

Items	₹
Inventory	1,00,000
Total Current Assets	1,60,000
Shareholders Fund	4,00,000
13% Debentures	3,00,000
Current Liabilities	1,00,000
Net Profit before Tax	3,51,000
Cost of Revenue from Operations	5,00,000

Question: Calculate Liquid Assets and Quick Ratio of the Company. (PYQ 2025)

A ₹60,000; 0.6 : 1

B ₹1,00,000; 1 : 1

C ₹1,60,000; 1.6 : 1

D ₹2,60,000; 2.6 : 1

💡 Short Explanation

Liquid Assets = Current Assets − Inventory − Prepaid Expenses. Quick Ratio = Liquid Assets ÷ Current Liabilities. Inventory is excluded because it is less liquid.

✅ Correct Answer Explanation

(Detailed) Liquid Assets: = Total Current Assets − Inventory = ₹1,60,000 − ₹1,00,000 = ₹60,000 Quick Ratio: = Liquid Assets ÷ Current Liabilities = ₹60,000 ÷ ₹1,00,000 = 0.6 Therefore, the Quick Ratio is: 0.6 : 1

❓ Why Other Options Are Incorrect

B) ₹1,00,000; 1 : 1
Incorrect. ₹1,00,000 is the value of Inventory, not Liquid Assets.
C) ₹1,60,000; 1.6 : 1
Incorrect. These are the values for Total Current Assets and Current Ratio, not Quick Ratio.
D) ₹2,60,000; 2.6 : 1
Incorrect. These figures do not relate to the liquidity components provided.

🎯 Strategy

Used

Substitution
Step 1: Calculate Liquid Assets.
Step 2: Look for ₹60,000 in the options.
Only Option A contains it.
Final Answer → A.

🧠 Memory Trick

(Quick Assets = Current Assets − Stock/Inventory)

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Section: Liquidity Ratios).

Items	₹
Inventory	1,00,000
Total Current Assets	1,60,000
Shareholders Fund	4,00,000
13% Debentures	3,00,000
Current Liabilities	1,00,000
Net Profit before Tax	3,51,000
Cost of Revenue from Operations	5,00,000

Question: Calculate Debt Equity Ratio of the company based on the given data: (PYQ 2025)

A 2 : 1

B 1 : 1

C 0.75 : 1

D 0.50 : 1

💡 Short Explanation

Measures long-term solvency. Formula: Long-term Debt ÷ Shareholders' Funds. Debt includes debentures/loans; Equity is Shareholders' Funds.

✅ Correct Answer Explanation

(Detailed) Long-term Debt: 13% Debentures = ₹3,00,000 Shareholders' Funds: = ₹4,00,000 Debt Equity Ratio: = ₹3,00,000 ÷ ₹4,00,000 = 0.75 Therefore, the Debt Equity Ratio is: 0.75 : 1

❓ Why Other Options Are Incorrect

A) 2 : 1
Incorrect. This is a commonly cited theoretical limit but does not match the data.
B) 1 : 1
Incorrect. This would require Debt and Equity to be equal.
D) 0.50 : 1
Incorrect. This would imply debt of ₹2,00,000 against equity of ₹4,00,000.

🎯 Strategy

Used

Elimination
Mathematical Check:
3 ÷ 4 = 0.75
Option C matches exactly.
Final Answer → C.

🧠 Memory Trick

(Debt ÷ Equity)

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Section: Solvency Ratios).

18 Calculate the Interest Coverage Ratio of the company. (PYQ 2025)

A 12 times

B 10 times

C 30 times

D 8 times

💡 Short Explanation

Measures ability to pay interest on debt. Formula: Interest Coverage Ratio = PBIT ÷ Interest Interest is calculated on the face value of debentures.

✅ Correct Answer Explanation

(Detailed) Interest on Debentures: = 13% of ₹3,00,000 = ₹39,000 Profit Before Interest and Tax (PBIT): = Profit Before Tax + Interest = ₹3,51,000 + ₹39,000 = ₹3,90,000 Interest Coverage Ratio: = ₹3,90,000 ÷ ₹39,000 = 10 times Therefore, the Interest Coverage Ratio is: 10 times

❓ Why Other Options Are Incorrect

A) 12 times
Incorrect calculation.
C) 30 times
Incorrect. Likely obtained by ignoring interest adjustment.
D) 8 times
Incorrect. Does not match the formula result.

🎯 Strategy

Used

Substitution
Interest = ₹3,00,000 × 13% = ₹39,000
PBIT = ₹3,51,000 + ₹39,000 = ₹3,90,000
ICR = ₹3,90,000 ÷ ₹39,000 = 10
Final Answer → B.

🧠 Memory Trick

"Profit before paying the bank" ÷ "What you owe the bank."

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Section: Solvency Ratios).

19 Calculate the Inventory Turnover Ratio of the company. (PYQ 2025)

A 4.5 times

B 7 times

C 6 times

D 5 times

💡 Short Explanation

Measures efficiency of inventory management. Formula: Cost of Revenue from Operations ÷ Average Inventory Since only one inventory figure is given, it is treated as Average Inventory.

✅ Correct Answer Explanation

(Detailed) Cost of Revenue from Operations (COGS): = ₹5,00,000 Average Inventory: = ₹1,00,000 (Used directly because opening and closing inventories are not separately given.) Inventory Turnover Ratio: = ₹5,00,000 ÷ ₹1,00,000 = 5 times Therefore, the Inventory Turnover Ratio is: 5 times

❓ Why Other Options Are Incorrect

A) 4.5 times
Incorrect calculation.
B) 7 times
Incorrect. May result from using sales instead of cost.
C) 6 times
Incorrect. Does not match the formula.

🎯 Strategy

Used

Dimensional/Unit Analysis
Inventory Turnover Ratio
= ₹5,00,000 ÷ ₹1,00,000
= 5
Turnover Ratios are expressed in "times."
Final Answer → D.

🧠 Memory Trick

(Cost of Goods Sold ÷ Stock)

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Section: Activity Ratios).

20 Identify the other name by which Liquid Ratio is known: (PYQ 2025)

A Current Ratio

B Activity Ratio

C Quick Ratio / Acid Test Ratio

D Solvency Ratio

💡 Short Explanation

Liquid Ratio measures the most liquid assets against current liabilities. It excludes Inventory and Prepaid Expenses. Known as the Acid Test because it is a stringent test of liquidity.

✅ Correct Answer Explanation

(Detailed) The Liquid Ratio is a liquidity ratio that indicates a company's ability to meet immediate short-term obligations using its most liquid assets such as: • Cash • Bank Balance • Trade Receivables Because it is stricter than the Current Ratio, it is also known as: • Quick Ratio • Acid Test Ratio Therefore, Option C is correct.

❓ Why Other Options Are Incorrect

A) Current Ratio
Incorrect. Current Ratio includes Inventory and is less stringent.
B) Activity Ratio
Incorrect. Activity Ratios measure efficiency, not liquidity.
D) Solvency Ratio
Incorrect. Solvency Ratios measure long-term financial stability.

🎯 Strategy

Used

Contextual/Tonal Matching
Liquid = Fast = Quick
Acid Test = Strict Liquidity Test
Final Answer → C.

🧠 Memory Trick

"Liquid as Water, Quick as a Flash, Acid for the Test."

📚 Class 12, Accountancy Part-II, Chapter 5: Accounting Ratios (Section: Liquidity Ratios).

CUET UG Categorised PYQ Accountancy Unit 9

Test Complete!

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