BALANCE SHEET

&
RATIO ANALYSIS
Q.1)Liability side of the
Balance Sheet represents?

Ans)Sources of Fund
Q.2)Assets side of Balance
sheet represents?

Ans:Uses of Funds
Q.3) What are Long term
Liabilities?
Ans: Liabilities which we
have to pay in long term i.e.
beyond 12 months
Q.4) What is a contingency?

Ans:An existing situation where uncertainty

exists as to possible gain or loss that will be

resolved when one or more future events occur or

fail to occur
Q.5) What is contingent
liability?

Ans: Liability which occur as the

result of a loss contingency.

Q.6)What are current liabilities?

Ans: Liabilities which we have to

pay in short term i.e within 12

months
Q.7) What is Capital/Share Capital?

Ans:Capital is the money invested by

the owners,promoters or the public
in a firm or a company.
Q.8) What is a Current Asset?
Ans) Anything that is expected to

be converted into cash or

consumed by the business within

one year from the date of the

balance sheet .
Q.9) What is Non Current Asset?

Ans) Anything that is not expected

to be converted into cash or
consumed by the business within
one year from the date of the
balance sheet.
Q.10) What is Fixed Asset?

Ans) Assets which are of relatively

permanent nature and they are not

disposed off within short period.

They are carried from year to year

and put to use.

Q.11) What are Intangible Assets?

Ans) Certain Assets in business don’t have any

physical presence or in other words these are

just book entries with certain specific

objectives. In order to account for the cost

incurred on such expenses ,they are shown as

assets in the book.

Q.12) Credit Balance in Balance
sheet is shown as?

Ans) Liability
Q.13) Debit balance in
Balance sheet is shown as?
Ans) Asset
Q14. A Balance Sheet gives the
financial position of unit?

Ans. As on particular date

Q.15) What is Net Worth?

Ans) Net Worth is the sum of Paid up

Capital and Reserve and Surplus

Q.16) What are Long
term Sources of Funds?
Ans) Net Worth and Long
term liabilities are called as
Long term Sources of
Funds.
Q.17) What are Short
term Sources of Funds?
Ans) Current Liabilities are
called as Short term Sources of
Funds.
Q.18) What are outside
liabilities?
Ans)Long Term Liabilities
and Short Term liabilities
are called as outside
liabilities.
Q.19) If the increase in
long term uses is higher
than the long term sources,
then what will be effect on
Net Working Capital?
Ans) Net Working Capital
will reduces
Q.20) What are short term
uses of funds?
Ans) Current Assets are
called as short term uses of
Funds.
Q.21)What are Long term
uses of Funds?
Ans)Assets other than Current

Assets are called as Long

term uses of Funds.

Q.22) What are Examples of Current

Liabilities?
Ans) Short Term borrowing from
Banks(CC/OD),Unsecured loans
payable within 12 months,Sundry
Creditors, Statutory
libilities(provision for taxation,
sales tax etc),Miscellaneous
current liability(provision for
dividend,bonus etc)
Q.23) What are examples are Current Assets?

Ans) Cash ,bank Balance, Inventory(Raw Material,

Stock in Process, Finished goods),Receivables,Pre

paid Expenses, Advances for purchase of raw

materials, components and consumable spares and

other advances.
Q.24) What are examples of Non

Current Assets?

Ans) Investment in Long Term loans to

sister or associate firms,Investment in non

marketable securities long and advances

of long term nature.

Q.25) What are example of Intangible

Assets?

Ans)Goodwill,Patents,Copyrights,

Trademarks, Preliminary/
Preoperative expenses.
Q.26)What are examples of
Long Term Liabilities?

Ans) Debentures,Term loans

raised from banks and financial

institutions for long term.

Q.27) What is Quasi equity ?

Ans)Though legally it is reflecting as a liability in the

books of the business enterprises this is a good as part

of equity from the point of view of the lending bank if

Principal & Interest both are repaid after the closure of

the bank’s loan then it will be treated as Equity else it

will be consider as Loan.

Q.28) Accumulated
depreciation is classified on
a balance sheet as a(n)

Ans). Contra asset to Property

and Equipment.
Q.29) Contributed capital is
classified on a corporation's
balance sheet as
Ans) A shareholders' equity
account
Q.30) Allowance for Doubtful
Accounts is classified on the
balance sheet as a(n)
Ans) Current asset.
Q.31) How Many types of
Capital are there in Case of a
Company?
Ans) Four Authorised,
Subscribed, Issued & Paid Up
Q.32)What is difference between
Reserve and Surplus?
Ans) Reserve consists of the
portion of earnings, receipts or
other surplus of an enterprises
kept aside by the management for
a general or specific purpose.
Surplus represents credit
Q.33)What is Tangible Net Worth?

Ans) If we Deduct Intangible

Assets from Net Worth, we will get

Tangible Net Worth.

Q.34)What is Net Working

Capital(NWC)/Net Current Asset

Ans: (Current Assets - Current

Libilities) or Long Term

Sources(LTS)-Long Term

Uses(LTU)
Q.35)What is Working Capital
Gap?
Ans) Current Assets-Current

Liabilities(Other than Bank

Borrowing)
Q.36)What is Cost Of Sales in P&L

Statements?

Ans) Cost of Sales represents cost of

production plus opening finished

goods’ stock minus closing finished

goods’ stock.
Q.37) Loss is classified

Ans Intangible Asset

Q.38) What is Cost Of Production in P& L Statements?

Ans)Cost of Production is the cost comprising

opening stock of stock in process less closing stock in

process plus cost of raw material consumed ,store and

spare consumed,power and Fuel direct labour ,repair and

maintenance,other manufacturing expenses and

depreciations.
Q.39) Profit will become
a part of_?

Ans) Net Worth under the head reserves.

 Q.40) What is Raw
Material Consumption?
Ans) RM Consumption represents raw

material purchased plus opening raw

material stock minus closing raw

material stocks.
 Q.41)What is Net Sale?

Ans)Net Sales are Gross

Sales minus returns,dicounts
Excise duty.
Q.42) What is Gross Working
Capital Called as?

Ans)Total Current Asset

Q.43)What is Net Owned
Funds?
Ans) Net Owned Funds or Tangible

net worth are the funds representing

paid up capital free reserves,capital

reserves reduced by accumlated loss

and Intangible Assets

Q.44)Current Ratio is____

Ans) Current Assets/ Current Liability

Q.45) Quick Ratio ______

Ans: (Current Asset-Stock)/(Current Liability)

Q.46) What is Debt Equity Ratio?

Ans :Long Term Outside liabilities/ Tangible Net Worth

Q.47) What is TOL/ANW ratio?

Ans) (Long Term Debt+ Current

Liability/ TNW-Investment in Sister

Concern)
Q.48) What is Asset
Coverage Ratio?

Ans: Total Value of Security/

Aggregated Funded Limit .

Q.49) What is Interest Coverage Ratio?

Ans :EBIT(Earnings Before Interest & Tax)

/Interest
Q.50) What is Fixed Asset Coverage Ratio?

Ans:Net Block(Capitalized & WIP)/Long Term Debt

Q.51) Raw Material holding period is

calculated as

Ans)Average Stock of Raw materials*12m/

Cost of Raw material consumed

 Q.52) Stock in process holding

period is calculated as

Ans) Average stock in process *12m / cost of

Production
Q.53)Finished Goods holding period is

calculated as?

Ans) Average stock of finished goods *12m/ cost of

sales
 Q.54) Debtor’s velocity
is calculated as?

Ans) Average sundry debtors*12m/Sales

Q.55)Creditor’s velocity
is calculated as

Ans)Average sundry creditors*12m/

Credit purchase
Q.56) What is Fixed Asset
Turnover

Ans)Sales/Fixed Asset
Q.57)What is Debtor’s turnover

Ans): Sales/Average debtors

Q.58)What is Inventory Turnover

Ans) Net Sales/Average Stocks

Q.59)Cash generation is calculated as

Ans)Net Profit+Depreciation+other
non cash expenditure
Q.60)Debt service coverage ratio is

calculated as

Ans) Net Profit +Depreciation+Interest on

Term Loan)/ (Installment of Term

loan+interest on Term Loan)

Q.61) What is Net Profit
Ratio

Ans) Net Profit/Sales*100

Q.62) What is operating
Profit ratio

Ans)Operating Profit/Sales *100

Q.63)What is Gross Profit Ratio?

Ans) Gross Profit/Net Sale* 100

Q.64)What is the classification of unsecured loan in Balance Sheet?

Ans:)Unsecured loan is treated as Quasi equity if the loan is not

to be repayable within the tenor of Bank Loan and the loan is

interest free or if a company pays interest on such loan, the rate

of interest on such loan should not exceed the rate of interest

paid on Bank Loan.

Q.65) Given that current liabilities are

at Rs. 300,000, current ratio is 3:1 and

quick ratio is 1:1, the value of stock

will be

Ans: Rs. 600,000

Q.66) Current Ratio is 4:1.Net Working

Capital is Rs.30000,What is Current Asset

Ans)40000
Q.67) Current Ratio is 2:5 .Current Liability

is Rs.30000.The Net Working Capital is

Ans: -18000
Q.68) The closing Stock of Raw Material is

Rs.50lacs which is double the amount of Opening

stock.Raw Material purchased during the year is

Rs.120 lacs.What is Raw Material Consumed?

Ans:95
Q.69) Opening Stock of Raw Material Is

Rs.30 Lacs,closing Stock is

Rs.50lacs.Annual purchase is Rs.500

lacs.What is the Average period of holding

of Raw Material.

Ans: 1 months
Q.70) Annual Sale of Unit is

2.5lacs.Excise duty during the year is

Rs.50000.Average Stock is

50000.Calculate stock turnover ratio is

Ans : 4
Q.71) Given that fixed assets are at Rs.

600,000 current assets Rs. 400,000 share

capital Rs. 500,000, Term liabilities Rs.

2,50,000, Current liabilities Rs. 2,50,000, the

solvency ratio will be

Ans: 20%
Q.72)The Total liabilities of a firm are

50,its long term uses are 20 and long

term sources 30.What is Current asset

and Current liability.

Ans:CA=30 ,CL=20
Q.73) A joint Stock company’s total assets

are Rs.45Cr which include intangible assets

worth Rs.2Cr .Its liabilities other than Share

capital and reserves are Rs.40Cr.What is the

amount of Tangible Net Worth?

Ans:3Cr
Q.74) As per the Balance Sheet of a

firm the Current ratio works out to

be 2:1 and the net working capital at

Rs.50000.What will be amount of

Current liabilities?
Ans:Rs.50000
Q.75)The Current ratio of a firm is 1.5:1 and

its tangible Net worth is Rs.5lacs.If the total

liabilities of the firm are Rs.30lacs and the

debt equity ratio is 3:1 ,what will be amount

of current liabilities?
Ans:Rs10lacs
Q.76) A balance Sheet shows long term

uses of funds at Rs.6lac and long term

sources of funds at Rs.8lac.What is the

Net Working Capital?

Ans:Rs.2lac
Q.77) The Balance Sheet of a firm has

shown total assets of Rs.20lacs.The long

term uses are Rs.11 lacs and current

ratio 1.5:1.What is the amount of Current

liabilities.

Rs.6lac
Q.78)Debt equity ratio is
3:1.Firm’s long term
liabilities are 90 and
amount of Intangible Assets
5.What is Net Worth
Ans) 35
Q.79)In a balance sheet amount

of total assets is Rs.10 lac,current

liability Rs.5lacs and capital and

Reserves Rs.2lac.What is the Debt

Equity ratio
Ans:1.5:1
Q.80) If long Term
Sources are 40 and debt
equity ratio is 3:1.if there
are no Intangible Assets
,the Net Worth is
Ans:10
Q.81) A firm has net profit of

Rs.20lac,depreciation Rs.5lac ,annual

interest payable on long term liabilities

Rs.5lac and annual Installment of the long

term liabilities is Rs.10lac.What is DSCR?

Ans:2
Q.82)Total liabilities of a firm are

Rs.80lac and current ratio 1.5:1 .If its

fixed assets and assets other than

current assets are Rs.50lacs and debt

equity ratio is 3:1,what is the amount

of long term liabilities?

Ans:Rs.45lac
Q.83)A firm has sales of Rs.200lac.Its

average stocks are Rs.40lac.The Stock

turnover ratio is :

Ans) 5 times
Q.84) A company has average book

debts of Rs.15lacs and its sales are

Rs.180lacs what is the debtor

velocity ratio?

Ans) 1months
Q.85)A firm has 3months’s debt

collection period. Its Sales are Rs.180

lacs .What is amount of average book

debts:

Ans) Rs.45lacs
Q.86)A company has net worth

Rs.5lacs,Term Liability

Rs.10lacs.Fixed Assets Rs.16lacs and

Current Assets Rs.25lacs.There is no

intangible Assets or ONCA.Calculate

Ans) -1lacs
NWC
 Q.87 Liabilities Assets
Capital 180 Net Fixed Asset 400
Reserves 20 Inventories 150
Term Loan 300 Cash 50
Bank CC 200 Receivables 150
Trade Creditor 50 Goodwill 50
Provisions 50
800
800

Calculate Net worth, TNW, NWC, Current Ratio,TOL/TNW

NW=200, TNW=150, NWC=50, CURRENT RATIO=1.17:1,

TOL/TNW=4
Q.88)Authorised capital of a company is Rs.5lac.

40% of Authorised Capital is paid up .Loss incurred

during the year is 50000.Accumulated loss carried

from last year is Rs 2lacs.Calculate the TNW of

company

Ans) -50000
Q.89) Suppose a hotel has Rs. 40,000 of longterm

debt at year end. Of this amount,

Rs.10,000 must be repaid within the next

year.Then what is long term debt under long term

liabilities in the classified balance sheet?

Ans) Rs.30000/-
Q.90) A firm has Capital Rs.12lac,Reserves Rs.4lac

Unsecured Loan Rs.5lacs,Current Asset

Rs.16lacs,preoperative expenses Rs.2lacs.What is

Net Worth?

Ans) Rs.16lac
Q.91) What is the maximum amount of unsecured

loan that can be treated as quasi capital?

Ans) 100% of Tangible Net Worth

Q.92)Fixed Asset and non current assets are

Rs.2lac and the bank borrowing Rs.1lac .The

total liabilities is Rs.5lac out of which the

other current liabilities are Rs.1lac.The

Working Capital Gap is Rs.

Ans:Rs.2lac
Q.93) If the Net Working
Capital of a Concern is NIL.
Its Current Ratio is
Ans) 1
Q.94) If a Current Ratio is
of a firm is very High.It
reflects
Ans) High Efficiency and
high liquidity
Q.95) Diversion of Fund
means?
Ans Use of Current liability for Long

term Uses.
Q.96)A FDR of a firm has
been lien marked in CC
limit. You will classify the
FDR as
Ans) Non Current Asset
Q.97)What is Gross
Profit?

Ans) Gross profit is Net

Sale less cost of sale.
Q.98) What is Operating
Profit?

Ans) Gross profit less

operating expenses
Q.99)What is Tangible
Assets?
Ans) Total Assets less
Intangible assets
Q.100)What are Quick
Assets?
Ans:) Those Assets which
are either ready cash or
can be quickly converted
into cash.
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