Read the following information and answer the question.
Following is the Balance Sheet of Titanic Ltd. as at March 31, 2022.
| Particulars | Amount (₹) |
| 1. Shareholder's Fund a) Share Capital b) Reserves & Surplus |
24,00,000 6,00,000 |
| 2. Non-current liabilities Long-term borrowings |
9,00,000 |
| 3. Current liabilities a) Short term borrowings b) Trade Payables c) Short-term Provisions |
6,00,000 23,40,000 60,000 |
| Total | 69,00,000 |
| II. Assets 1)Non-Current Assets a) Fixed assets b) Tangible assets |
45,00,000 |
| 2. Current Assets a) Inventories b) Trade Receivables c) Cash and Cash equivalent d) Short-term loans & advances |
12,00,000 9,00,000 2,28,000 72,000 |
| Total | 69,00,000 |
The..................ratio provides the information critical to the survival of the firm.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Solvency
Solvency ratios judge whether the business can meet its long-term obligations – the interest on its long-term debt and the repayment of the principal. A firm that cannot meet these obligations cannot survive in the long run, so these ratios give the information on which its survival depends.
Option (1) Liquidity — Incorrect. Liquidity ratios measure short-term solvency, the ability to pay current liabilities as they fall due.
Option (2) Activity — Incorrect. Activity (turnover) ratios measure how quickly assets such as inventory and receivables are turned into revenue from operations or cash.
Option (4) Profitability — Incorrect. Profitability ratios measure the earning capacity of the business, not its ability to meet long-term obligations.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
|
