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Home Questions CQSB5FYA6P
Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

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.

Options:

Liquidity

Activity

Solvency

Profitability

Correct Answer:

Solvency

Explanation:

The correct answer is option 3- Solvency.

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. Solvency ratio provide the information critical to the long-term operation of the firm. Therefore, the solvency ratio provides the information critical to the survival of the firm.

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