(revenue from operations) net sales. It may be computed directly or as a residual of operating ratio. (i) Debt to Equity ratio It establishes the relationship between long-term debt (external equities) and the equity (internal equities) i.e. A higher ratio ensures safety of interest on debts.   Average Trade Payable = (Opening Creditors and Bills Payable + Closing Creditors and Bills Payable)/2 (d) Cash and cash equivalents (cash in hand, cash at bank, cheques/drafts in hand) Liquidity Ratio = Rs. 5,000) (iv) Helps in identification of problem areas. (iv) Short-term provisions. It is expressed as Quick ratio = Quick Assets: Current Liabilities or Quick Assets / Current Liabilities. Here cost of goods sold = Operating stock + Net purchases + Manufacturing expenses - Closing stock . 16,000 = 2 : 1. 2,40,000 To assess the operating efficiency of the business. Total Assets Total assets include Profitability Ratios These ratios measure the profitability of a business assessing the and helps in overall efficiency of the business. 2,00,000.  Carriage inwards = 4,000, Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory In the form of a formula this ratio is expressed as follows: Operating Cost = Cost of Materials Consumed + Purchases of Stock-in-trade + Change in Inventories of Finished Goods, Work-in-progress and Stock-in-trade + Employees Benefits Expenses + Other Expenses (Other than non-operating expenses) »Current Assets [Current investments + Inventories (including spare parts and loose tools) + Trade Receivables + Cash and Cash Equivalents + Short-term Loans and Advances + Other Current Assets] = Rs.  Revenue from operations = 80,000  Share Capital = Equity share capital + Preference share capital, Shareholders’ Funds (Equity) = Non-current assets + Working capital − Non-current liabilities Working Capital = Current Assets − Current Liabilities, From the following information calculate Debt equity Ratio:-, Debt to equity ratio = Debt / Equity (shareholder funds) = 1,00,000 / 1,75,000 = 0.57 : 1 5. Cash Revenue from operations = 20% of Rs. Get Accounting Ratios, Accountancy Chapter Notes, Questions & Answers, Video Lessons, Practice Test and more for CBSE Class 10 at TopperLearning. (b) Long-term provisions Finance expenses are generally excluded. Accounting Ratios class 12 Notes Accountancy. 2,40,000 / Rs. 2,20,000 40,000 + Rs. The three common liquidity ratios used are current ratio, quick ratio, and burn rate. Working Capital = Current Assets – Current Liabilities Academic Partner. 70,000 2 = Rs. 10,00,000 = Rs. (v) Other current assets except prepaid expenses. 90,000 = Rs. = Rs. In the absence of opening creditors and bills payable, closing creditors and bills payable can be used in the above formula. Operating Ratio = Operating Cost / Net Revenue from Operations × 100 = Rs. (ii) To know about the potential areas which can be improved on. 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