Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

Match the following

LIST 1 LIST 2
1) Current assets a) Inventory turnover ratio
2) Quick assets b) Debt-equity ratio
3) Shareholder's funds c) Quick ratio
4) Cost of Revenue from operations d) Current ratio

Choose the correct answer from below.

Options:

1) c, 2) b, 3) a, 4) d

1) b, 2) a, 3) c, 4) d

1) d,2) c, 3) b, 4) a

1) d, 2) b, 3) c, 4) a

Correct Answer:

1) d,2) c, 3) b, 4) a

Explanation:

The correct answer is option 3- 1) d,2) c, 3) b, 4) a

* Current assets
Current Ratio =
Current Assets / Current Liabilities
The Current Ratio measures a company's ability to meet its short-term obligations using its current assets. It assesses short-term liquidity and the company's ability to cover current liabilities.

* Quick assets
Quick Ratio =
Quick Assets /Current Liabilities
The Quick Ratio measures a company's ability to meet its short-term liabilities using its most liquid assets, excluding inventory. It provides a more stringent measure of liquidity compared to the Current Ratio.

* Shareholder's funds
Debt-Equity Ratio =
Long-term Debts / Shareholders’ Funds
The Debt-Equity Ratio measures the proportion of a company's financing that comes from long-term debt relative to shareholders' equity. It is an indication of the company's financial leverage or how much it relies on debt financing versus equity financing.

* Cost of Revenue from operations
Inventory Turnover Ratio =
Cost of Revenue from Operations / Average Inventory
The Inventory Turnover Ratio measures how efficiently a company manages its inventory. It indicates how many times a company's inventory is sold and replaced during a specific period.