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mediumMCQCUET Accountancy 2023 29 May Shift 22026Accountancy
1 mark

Every company analyses its earning capacity of the business which is an outcome of utilisation of resources employed in the business. To analyse profitability, a company can use:A. Dividend Payout RatioB. Return on Net WorthC. Gross Profit RatioD. Quick RatioE. Inventory Turnover RatioChoose the correct answer from the options given below:

  1. A
    C and E only
  2. B
    C, D and E only
  3. C
    A, B and C only
  4. D
    A, C and E only

Solution & Step-by-step Explanation

Let's break down the ratios by their accounting classifications:Profitability Ratios: These measure the operating efficiency and earning capacity of a business. This includes Dividend Payout Ratio (A), Return on Net Worth (B), and Gross Profit Ratio (C).Liquidity Ratios: Quick Ratio (D) measures short-term solvency.Activity/Efficiency Ratios: Inventory Turnover Ratio (E) measures how efficiently inventory is managed.Therefore, metrics A, B, and C are utilized explicitly to evaluate profitability.

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Every company analyses its earning capacity of the business which is an outcome of utilisation of resources employed in the business. To analyse profitability, a company can use:A. Dividend Payout RatioB. Return on Net WorthC. Gross Profit RatioD. Quick RatioE. Inventory Turnover RatioChoose the correct answer from the options given below:
A
C and E only
B
C, D and E only
C
A, B and C only
D
A, C and E only

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