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Here is a compilation of top thirteen accounting problems on ratio analysis with its relevant solutions. Problem 1: The following is the Balance Sheet of a company as on 31st March:
Full Cambridge International (CIE) accounting past paper questions and answers. Multiple choice questions and structured questions are classified by topic. Download in PDF.
(b) Explain why the quick ratio is a better measure of liquidity than the current ratio. Answer: Inventory is excluded from the calculation of the quick ratio. Inventory is not regarded as a liquid asset.
By the end of this section you should be able to: explain the meaning of the term accounting ratios. classify accounting ratios into profitability, liquidity, efficiency and investment ratios. define liquidity ratios. calculate liquidity ratios (current, quick) explain the uses of liquidity ratios.
Ratio analysis is a technique that examines the relationship between financial statement items to evaluate a firm's profitability, operational efficiency, and financial position. Ratios can be classified traditionally based on the financial statements or functionally based on the purpose.
What are Accounting Ratios? Accounting ratios cover a wide array of ratios that are used by accountants and act as different indicators that measure profitability, liquidity, and potential financial distress in a company’s financials.
INTERPRETATION OF ACCOUNTS – RATIO ANALYSIS. Introduction. •. ratio analysis is a method traditionally used by people who wish to understand more fully the financial statements and performance of an entity. •. it may be used to identify unusual items, trends or financial problems but, to be of any use, it depends entirely on comparisons being made.
