Based on ISM MBA Accounting Assignment Solution and others
Answer:
The ratio can be expressed in 3 terms:
- Simple or pure ratio.
- Percentage.
- Rate.
- Simple or pure ratio –
It gives a simple relationship between two figures. We take simple example of current ratio, it means consider the relationship between current assets and current liabilities, if the current assets are Rs.4,00,000/- and current liabilities are Rs.2,00,000/-, the ratio is derived by dividing Rs.4,00,000/- by Rs.2,00,000/-, then the answer is 2 which will be expressed on 2:1.
- Percentage –
Some ratio‟s is expressed in terms of percentage. The relationship between profit and sales is expressed in percentage. For example- If sales are Rs.10, 00,000/- and gross profit is Rs.5,00,000/- then it is expressed as gross profit being 50% of sales.
- Rate-
Ratios are also expressed in terms of rates. i.e. number of times or certain period. The relationship between stock is expressed in terms of rates. For Example- If stock turn over rate is said to be 6 times in a year, it mean that the stock is converted into sales 6 times in 12 months.
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