Quick ratio = \(\frac { Quick\quad assets }{ Current\quad liabilities } \)
Quick assets = Current assets - Inventories - Prepaid expenses
= Rs.4,50,00 + Rs.70,000 - Rs.20,000
= Rs.3,60,000
Quick ratio = \(\frac { 3,60,000 }{ 2,40,000 } \) = 1:5:1

(i) Ratios are only means: Ratios are not end in themselves but they are only means to achieve a particular purpose.
(ii) Accuracy of financial information : The accuracy of a ratio depends on the accuracy of information taken from financial statements.

(i) Return on investment shows the proportion of net profit. before interest and tax to capital employed (shareholders' funds and long term debts).
(ii) This ratio measures how efficiently the capital employed is used in the business.
(iii) It is an overall measure of profitability of a business concern.
(iv) It is computed as below: Return on Investment (ROI)
= \(\frac { Net\ profit\ before\ interest\ and\ tax }{ Capital\ employed } \) x 100
​​​​​​​Capital employed = Share holder's fund + Non currebt liablities greater the return on investment better is the profitability of a business and vice versa

Debt equity ratio = \(\frac{Long\ term\ debt}{Shareholders'funds}\) = \(\frac{80,000}{1,60,000}\) = 0.5:1
Long term debt = Debentures = Rs.80,000
Shareholders’ funds = Equity share capital + Reserves and surplus
= 1,00,000 + 60,000 = Rs.1,60,000
(ii) Proprietary ratio
Proprietary ratio gives the proportion of shareholders’ funds to total assets. Proprietary ratio shows the extent to which the total assets have been financed by the shareholders’ funds. It is calculated as follows:
Proprietary ratio = \(\frac{Shareholders'funds}{Total\ assets}\)
Higher the proprietary ratio, greater is the satisfaction for lenders and creditors, as the firm is less dependent on external sources of finance.

(i) Current ratio = \(\frac { Current\quad assets }{ Current\quad liabilities } \)
Current assets = Inventories + Trade debtors + Cash and cash equivalents + Prepaid expenses
= Rs.1,60,0,000 + Rs.3,20,000 + Rs.80,000 + Rs.40,000 = Rs.6,00,000
Current liabilities = Short term borrowings + Trade payables + Expenses payable + Short term provisions
= Rs.50,000 + Rs.,10,000 + Rs.15,000 + Rs.25,000 = Rs.4,00,000
Current ratio = \(\frac { 6,00,000 }{ 4,00,000 } \) = 1.5:1
(ii) Quick ratio = \(\frac { Quick\quad assets }{ Current\quad liabilities } \)
Quick assets = Current assets - Inventories - Prepaid expenses
= Rs.6,00,000 - Rs.1,60,000 - Rs.40,000 = Rs.4,00,000
Quick ratio = \(\frac { 4,00,000 }{ 4,00,000 } \) =1:1

(i) Operating profit ratio gives the proportion of operating profit to revenue from operations.
(ii) Operating profit ratio is an indicator of operational efficiency of an organisation.
(iii) It may be computed as follows: Operating profit ratio
= \(\frac { Operating\ profit }{ Revenue\ from\ operations } \times 100\)
Alternatively, it is calculated as under.
Operating profit ratio = 100% - Operating cost ratio
Operating profit = Revenue from operations - Operating cost
(iv) A higher ratio indicates better profitability. Greater the operting ratio, higher is the margin available for paying non-operating expenses.

(i) Inventory conversion period is the time taken to sell the inventory.
(ii) A shorter inventory conversion period indicates more efficiency in the management of inventory.
(iii) It is computed as follows:
Inventory conversion period (in days)
= \(\frac { Number\ of\ days\ in\ a\ year }{ Inventory\ turnover\ ratio } \)
Inventory conversion period (in months)
= \(\frac { Number\ of\ month\ in\ a\ year }{ Inventory\ turnover\ ratio } \).

Following are the objectives of ratio analysis:
(i) To simplify accounting figures
(ii) To facilitate analysis of financial statements
(iii) To analyse the operational efficiency of a business
(iv) To help in budgeting and forecasting
(v) To facilitate intra firm and inter firm comparison of performance