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Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

Read the following information and answer the question.

Following is the Balance Sheet of Titanic Ltd. as at March 31, 2022.

Particulars Amount (₹)
1. Shareholder's Fund
a) Share Capital
b) Reserves & Surplus
24,00,000
6,00,000
2. Non-current liabilities 
Long-term borrowings		 9,00,000
3. Current liabilities
a) Short term borrowings
b) Trade Payables
c) Short-term Provisions
6,00,000
23,40,000
60,000
Total 69,00,000
II. Assets
 1)Non-Current Assets
 a) Fixed assets
 b) Tangible assets
45,00,000
2. Current Assets
a) Inventories
b) Trade Receivables
c) Cash and Cash equivalent
d) Short-term loans & advances
12,00,000
9,00,000
2,28,000
72,000
Total 69,00,000

The..............ratios are primarily a measure of earning capacity.

Options:

Liquidity

Activity

Debt

Profitability

Correct Answer:

Profitability

Explanation:

The correct answer is option 4- Profitability.

The Profitability ratios are primarily a measure of earning capacity.

The profitability or financial performance is mainly summarised in the statement of profit and loss. Profitability ratios are calculated to analyse the earning capacity of the business which is the outcome of utilisation of resources employed in the business. There is a close relationship between the profit and the efficiency with which the resources employed in the business are utilised.

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