# Accounting Ratios Notes, Class 12 Accountancy | SwaVid Accounting Ratios, NCERT Class 12 Accountancy: notes with key ideas, formats, common mistakes and 3 quick checks with worked answers. Canonical: https://www.swavid.com/cbse/class-12/accountancy/chapter/accounting-ratios Source: https://www.swavid.com/cbse/class-12/accountancy/chapter/accounting-ratios # Accounting Ratios ## Definitions, formats and formulas ## Key ideas ## Common mistakes ## Quick checks ## Keep going ## Questions parents ask ## Class 12 Accountancy on SwaVid ### Meaning and expression of ratios ### Liquidity ratios ### Solvency ratios ### Activity or turnover ratios ### Profitability ratios ### Next chapter ### Related chapter ### Related chapter ### All chapters SwaVid › CBSE › Class 12 › Accountancy › Accounting Ratios Notes written by SwaVid from the NCERT textbook. Class 12 Accountancy, NCERT Accountancy Part II: companies, analysis and cash flow. Key ideas, definitions and common mistakes. CBSE does not print marks for a single chapter. Short answer. This chapter explains the mathematical computation and interpretation of financial ratios from company balance sheets and statements of profit and loss. It helps students evaluate liquidity, solvency, activity, and profitability to judge business performance. Source: NCERT Accountancy Part II: companies, analysis and cash flow (Reprint 2026-27) , Accounting Ratios An accounting ratio is a mathematical expression showing the relationship between two interdependent accounting figures. Ratios can be expressed as a pure number, percentage, rate or times, or as a fraction. Liquidity ratios assess the ability of the enterprise to meet its short-term financial obligations. They include the current ratio and the quick or liquid ratio. Solvency ratios measure the long-term viability and ability of the business to meet long-term liabilities. Key measures include debt-equity ratio, debt to capital employed ratio, proprietary ratio, and interest coverage ratio. Activity ratios measure how effectively a firm employs its assets to generate revenue. Major turnover ratios cover inventory, trade receivables, trade payables, and working capital. Profitability ratios reflect the earning capacity of the business relative to revenue or capital invested. Key measures include gross profit ratio, operating ratio, operating profit ratio, net profit ratio, and return on investment. Try each question first. Then tap it to see the answer. Quick assets = Current assets - Inventory - Prepaid expenses = 4,00,000 - 80,000 - 20,000 = ₹3,00,000 Quick ratio = 3,00,000 / 1,50,000 = 2 : 1 2 : 1 Average inventory = (70,000 + 1,30,000) / 2 = ₹1,00,000 Inventory turnover ratio = 6,00,000 / 1,00,000 = 6 times 6 times Net profit before tax = Net profit after tax / (1 - 0.40) = 1,20,000 / 0.60 = ₹2,00,000 Net profit before interest and tax = 2,00,000 + 40,000 = ₹2,40,000 ₹2,40,000 Cash Flow Statement . Financial Statements of a Company . Analysis of Financial Statements . The 10 chapters of Class 12 Accountancy . CBSE does not give marks to one chapter. It prints marks for units or parts, and the chapter list page shows them all. No. They are written by SwaVid from the NCERT textbook. The CBSE curriculum is the reference for what is assessed. Cash Flow Statement. SwaVid is an AI tutor for Indian students in Classes 6 to 12. It finds the earlier ideas a child missed, then teaches today’s chapter. Start free to see how it works. - NCERT NCERT book, Class 12 - 80 marks, theory paper - 3 quick checks - Including inventory and prepaid expenses in quick assets . Subtract inventory and prepaid expenses from current assets when calculating quick assets. - Using total revenue instead of net credit revenue in trade receivables turnover . Deduct cash revenue from operations from total revenue from operations to obtain net credit revenue. - Adding operating ratio and operating profit ratio incorrectly . Remember that operating ratio plus operating profit ratio always equals 100 percent. - Ignoring tax when finding net profit before interest and tax . Add both tax paid or provided and interest on long-term borrowings back to net profit after tax. ## Key Links - [CBSE](https://www.swavid.com/cbse) - [Class 12](https://www.swavid.com/cbse/class-12) - [Accountancy](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [Start free →](https://www.swavid.com/signup) - [All 10 chapters](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [NCERT Accountancy Part II: companies, analysis and cash flow (Reprint 2026-27)](https://ncert.nic.in/textbook.php?leac2=0-6) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/cash-flow-statement) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/financial-statements-of-a-company) - [Open notes](https://www.swavid.com/cbse/class-12/accountancy/chapter/analysis-of-financial-statements) - [Class 12 Accountancy](https://www.swavid.com/cbse/class-12/accountancy/chapters) - [Start free →](https://www.swavid.com/signup)