Make the right combination of the ratios that enables to find the short term liquidity.(a) Return on Equity(b) Acid Test Ratio(c) Current Ratio(d) Sacrificing Ratio(e) Inventory Turnover RatioChoose the most appropriate answer from the options given below:
- A(a) and (b) only
- B(b) and (d) only
- C(c) and (d) only
- D(b) and (c) only
Solution & Step-by-step Explanation
Short term liquidity ratios measure the ability of the firm to meet its short-term obligations. Current Ratio (c) and Acid Test Ratio / Quick Ratio (b) are standard liquidity ratios. Return on Equity is a profitability ratio, Inventory Turnover is an activity ratio, and Sacrificing Ratio is used in partnership restructuring.