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[ BASIC ACCOUNTING RATIOS ]

(Learning Outcomes)






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Assets/
Capital
Employed
Equity

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(Introduction)

(Ratio and Ratio Analysis)

(Meaning of Accounting Ratios):

(G/P) 5,000 (Revenue from

Oprations) 50,000 10% [(5000/
50,000)×100] (Gross Profit Ratio)
( Ratio Analysis):

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 (Pure) :

 (Percentage) :

 (Times) :

 (Fraction) :
(Objectives of Ratio Analysis)

(Advantages of Ratio Analysis)

(Helps to understand utility of decisions) :

(Judgement of liquidity position) :

(Assessment of long term solvency) :

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(Identification of problem areas) :

(Intra firm comparison and inter firm comparison) :

(Trend Analysis) :

(Limitations of Ratio Analysis)

Limitation of Accounting Data

(Non-Consideration of fluctuation in purchasing

of money):

(Non-accounting of qualitative or non-monitory

data):

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(Variations in Accounting Practices):

(Forecasting):

(Not a Standard yard stick):

(Means and not the end) :

(Lack of ability to resolve problems) :

(whistle blower)

(Lack of standardised definition) :

(Lack of universally accepted standard levels):

(Type of Ratios)

(Statement of Profit and Loss Ratios) :

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(Balance Sheet Ratios) :

(Composite Ratios) :

(Functional classification)

(Liquidity Ratios) :

(Solvency Ratios) :

[Activity (or Turnover) Ratios] :

(Profitability Ratios) :

(Liquidity Ratios)

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(a)
(b)
(c)
(d)

(a) (Current ratio) :

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(b) (Quick ratios) : " (Acid test)"

(Quick assets) :
'Near cash assets'
(Liquidation value)
'Near cash assets'

(Acid-Test)

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(c) (Cash Ratio/Absolute Liquidity Ratio) :

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(d) (Net working capital ratio) :

Net Working Capital Ratio = Current Assets - Current Liabilities (excluding short term book borrowings)

(Long Term Solvency Ratio/Leverage Ratio)

(i)
(ii)

(Capital Structure Ratios)

(a)
(b)
(c)

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