Match List – I with List – II.

Choose the correct answer from the options given below:

(A)-(IV), (B)-(II), (C)-(III), (D)-(I)

The correct answer is Option (3) - (A)-(IV), (B)-(II), (C)-(III), (D)-(I).

* Current Ratio- Liquidity position. This ratio measures the company's ability to pay off its current liabilities with its current assets. A Current Ratio greater than 1 indicates that the company has sufficient current assets to cover its current liabilities, which is considered a healthy liquidity position. The ideal ratio is 2:1.

* Turnover Ratio- Efficiency in utilization of resources. Turnover ratios provide insights into a company's operational efficiency and its ability to generate sales or turnover. Key turnover ratios encompass Inventory Turnover, Trade Receivables Turnover, Trade Payables Turnover, Working Capital Turnover, Fixed Assets Turnover, and Current Assets Turnover.

* Debt equity Ratio - Long term solvency. Debt-Equity Ratio measures the relationship between long-term debt and equity. If debt component of the total long-term funds employed is small, outsiders feel more secure. From security point of view, capital structure with less debt and more equity is considered favourable as it reduces the chances of bankruptcy. Normally, it is considered to be safe if debt equity ratio is 2 : 1. However, it may vary from industry to industry. It is computed as follows:
Debt-Equity Ratio = Long−term Debts/ Shareholders’ Funds

* Interest Coverage Ratio- How many times interest on long term debt is covered by the Profits before Interest and tax. It is a ratio which deals with the servicing of interest on loan. It is a measure of security of interest payable on long-term debts. It expresses the relationship between profits available for payment of interest and the amount of interest payable. It is calculated as follows:
Interest Coverage Ratio = Net Profit before Interest and Tax / Interest on long-term debts.
It reveals the number of times interest on long-term debts is covered by the profits available for interest. A higher ratio ensures safety of interest on debts.