Match the following-

Choose the correct answer from the options given below.

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

The correct answer is option 2- A-III, B-IV, C-II, D-I.

* Short-term solvency- Liquidity Ratios: To meet its commitments, business needs liquid funds. The ability of the business to pay the amount due to stakeholders as and when it is due is known as liquidity, and the ratios calculated to measure it are known as ‘Liquidity Ratios’. These are essentially short-term in nature. 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.

* Long-term solvency- Solvency Ratios: Solvency of business is determined by its ability to meet its contractual obligations towards stakeholders, particularly towards external stakeholders, and the ratios calculated to measure solvency position are known as ‘Solvency Ratios’. These are essentially long-term in nature. 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.

* Efficiency ratios- Activity (or Turnover) Ratios: This refers to the ratios that are calculated for measuring the efficiency of operations of business based on effective utilisation of resources. Hence, these are also known as ‘Efficiency Ratios’.

* Profitability ratios- Operating ratio. Profitability ratios delve into a company's capacity to generate earnings based on the utilization of its resources. Prominent profitability ratios include the Gross Profit ratio, Operating ratio, Net Profit Ratio, Return on Investment etc. Operating ratio is computed to analyse cost of operation in relation to revenue from operations. It is calculated as follows: Operating Ratio = (Cost of Revenue from Operations + Operating Expenses)/ Net Revenue from Operations ×100.