Match List-I with List-IIList–IList–II(A) Profitability Ratios(I) This refers to the ratios that are calculated for measuring the efficiency of operations of a business based on effective utilization of resources.(B) Activity Ratios(II) The ability of a business to pay the amount due to stakeholders as and when it is due.(C) Liquidity Ratios(III) The ability to meet its contractual obligations towards stakeholders, particularly towards external stakeholders.(D) Solvency Ratios(IV) It refers to the analysis of profits in relation to revenue from operations or funds (or assets) employed in the business.Choose the correct answer from the options given below:
- A(A) - (I), (B) - (II), (C) - (III), (D) - (IV)
- B(A) - (IV), (B) - (I), (C) - (II), (D) - (III)
- C(A) - (II), (B) - (I), (C) - (IV), (D) - (III)
- D(A) - (III), (B) - (IV), (C) - (I), (D) - (II)
Solution & Step-by-step Explanation
Matching the accounting ratio groups with their fundamental analytical purposes:(A) Profitability Ratios matches with (IV): Analyzes earnings performance in relation to revenue or funds employed.(B) Activity Ratios matches with (I): Measures speed or operational efficiency in utilizing assets/resources (also called Turnover ratios).(C) Liquidity Ratios matches with (II): Evaluates short-term capability to satisfy immediate obligations when due.(D) Solvency Ratios matches with (III): Evaluates long-term ability to meet all fixed contractual external obligations.This provides the matching profile: (A) - (IV), (B) - (I), (C) - (II), (D) - (III).