abhishreshthaa
Abhijeet S
DIFFERENT MODES OF EXPRESSING AN ACCOUNTING RATIO
Ratio may be expressed In different ways. They are as follows:
a) Simple or Pure Ratios,
b) Percentages,
c) Rate.
a) Simple or Pure Ratios
Simple or pure ratio is merely a quotient arrived by simple division of one number by another.
Example:
When the current assets of a business organisation are Rs. 60,000 and current liabilities are Rs. 15,000 the ratio is derived by dividing Rs. 60,000 by Rs. 15,000.
It will be expressed as = 60,000 4 or as 4:1
15,000
b) Percentages
Ratios are expressed as percentage relations when the simple or ratios are multiplied by 100. The resulting ratios are known as percentage ratios.
Example:
Thus, the current ratio in the above example — expressed in percentage by multiplying 4 by 100. The ratio will be as 400%.
60,000
i.e. 100
15,000
c) Rate
Sometimes, ratios are expressed as rates which refer to ratios over a period of time. Example: Stock has turned over 6 times a year’.
Ratio may be expressed In different ways. They are as follows:
a) Simple or Pure Ratios,
b) Percentages,
c) Rate.
a) Simple or Pure Ratios
Simple or pure ratio is merely a quotient arrived by simple division of one number by another.
Example:
When the current assets of a business organisation are Rs. 60,000 and current liabilities are Rs. 15,000 the ratio is derived by dividing Rs. 60,000 by Rs. 15,000.
It will be expressed as = 60,000 4 or as 4:1
15,000
b) Percentages
Ratios are expressed as percentage relations when the simple or ratios are multiplied by 100. The resulting ratios are known as percentage ratios.
Example:
Thus, the current ratio in the above example — expressed in percentage by multiplying 4 by 100. The ratio will be as 400%.
60,000
i.e. 100
15,000
c) Rate
Sometimes, ratios are expressed as rates which refer to ratios over a period of time. Example: Stock has turned over 6 times a year’.