Welcome to the NCERT Solutions for Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter Accounting Ratios. This page offers a step-by-step solution to the specific question from Exercise 2, Question 1:
What are liquidity ratios? Discuss the importance of current and liquid ratio.
. With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.What are liquidity ratios? Discuss the importance of current and liquid ratio.
Liquidity ratios are calculated to determine the short-term solvency of a business, i.e. the ability of the business to pay back its current dues. Liquidity means easy conversion of assets into cash without any significant loss and delay. Short-term creditors are interested in ascertaining liquidity ratios for timely payment of their debts.
Liquidity ratio includes:
Current Ratio: It explains the relationship between current assets and current
liabilities. It is calculated as:
Current Ratio = Current Assets/Current Liabilities
Liquid Ratio or Quick Ratio: It explains the relationship between liquid assets and current liabilities. It indicates whether a firm has sufficient funds to pay its current liabilities immediately. It is calculated as:
Liquid Ratio = Liquid Asset/Current LiabilitiesLiquid
Liquids Assets = Current Assets – Stock – Prepaid Expenses.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
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Welcome to the NCERT Solutions for Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter . This page offers a step-by-step solution to the specific question from Excercise 2 , Question 1: What are liquidity ratios? Discuss the importance of current and liquid ratio.....
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