Match List-I with List-IIList-I(Accounting ratio)List-II(Type of accounting ratio)(A) Current ratio(I) Liquidity ratios(B) Stock turnover ratio(II) Activity ratios(C) Debt Equity ratio(III) Solvency ratios(D) Operating ratio(IV) Profitability ratiosChoose the correct answer from the options given below:
- A(A) - (I), (B) - (II), (C) - (III), (D) - (IV)
- 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
Standard financial analysis framework categorizes accounting ratios as follows:(A) Current ratio: Measures short-term obligations matching capacity, classified under (I) Liquidity ratios.(B) Stock (Inventory) turnover ratio: Quantifies the efficiency of inventory utilization and velocity, classified under (II) Activity ratios (or Turnover ratios).(C) Debt Equity ratio: Evaluates long-term operational capitalization security and leverage, classified under (III) Solvency ratios.(D) Operating ratio: Assesses operating cost relationships to sales margins, classified under (IV) Profitability ratios.Thus, the proper alignment matches option 1: (A) - (I), (B) - (II), (C) - (III), (D) - (IV).