Match List-I with List-II:List-I(A) Liquidity Ratio(B) Solvency Ratio(C) Activity (or Turnover) Ratio(D) Profitability RatioList-II(I) Inventory Turnover ratio(II) Quick Ratio(III) Price earning ratio(IV) Total asset to debt ratioChoose the correct answer from the options given below:
- A(A) - (II), (B) - (IV), (C) - (I), (D) - (III)
- B(A) - (I), (B) - (III), (C) - (II), (D) - (IV)
- C(A) - (I), (B) - (II), (C) - (IV), (D) - (III)
- D(A) - (III), (B) - (IV), (C) - (I), (D) - (II)
Solution & Step-by-step Explanation
The correct classification of accounting ratios is as follows:Liquidity Ratio: Measures the short-term debt-paying ability of a business. Quick Ratio is a standard liquidity ratio. Therefore, (A) matches with (II).Solvency Ratio: Assesses the long-term viability and ability to meet long-term obligations. Total asset to debt ratio is a solvency ratio. Therefore, (B) matches with (IV).Activity (or Turnover) Ratio: Measures the efficiency with which a firm uses its assets. Inventory Turnover ratio belongs here. Therefore, (C) matches with (I).Profitability Ratio: Evaluates the profit-earning capacity. Price earning ratio (P/E ratio) relates market value per share to earnings per share, measuring profitability from an investment standpoint. Therefore, (D) matches with (III).Thus, the correct mapping is (A) - (II), (B) - (IV), (C) - (I), (D) - (III).