Which of the following statements are True about ratio analysis?

(A) A ratio reflects quantitative and qualitative aspects of results.

(B) Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount

(C) A ratio is always expressed as a quotient of one number divided by another.

(D) Ratios help in comparisons of a firm's results over a number of accounting periods as well as with other business enterprises.

Choose the correct answer from the options given below:

(B) and (D) only

The correct answer is option 1- (B) and (D) only.

(A) A ratio reflects quantitative and qualitative aspects of results. IT IS NOT TRUE as qualitative aspects of results are not reflected.  Accounting provides information about quantitative (or monetary) aspects of business. Hence, the ratios also reflect only the monetary aspects, ignoring completely the non-monetary (qualitative) factors.

(B) Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount. IT IS TRUE. Long-term borrowings are concerned to long-term lenders or creditors—such as banks, bondholders, or other financial institutions that lend money to a company for several years (typically more than one year).This refers to loans or debt that a company takes on and must repay over a longer period—usually more than a year. The lenders want to know whether the company can fulfill its responsibilities. These responsibilities include Paying interest regularly (usually yearly or semi-annually), Repaying the principal (the original amount borrowed) when it's due. If a company can’t meet these obligations- it may default on the loan, Lenders could lose money, The company’s credit rating could fall, making future borrowing more expensive or impossible. Long-term lenders care most about whether the company they lent money to will Pay them interest regularly, and Give back the full amount borrowed at the end of the loan term. This is a key part of analyzing a company’s solvency—its ability to survive over the long run financially.

(C) A ratio is always expressed as a quotient of one number divided by another. IT IS NOT TRUE as it is not expressed as quotient.  A ratio is a mathematical number calculated as a reference to relationship of two or more numbers and can be expressed as a fraction, proportion, percentage and a number of times. When the number is calculated by referring to two accounting numbers derived from  the financial statements, it is termed as accounting ratio. 

(D) Ratios help in comparisons of a firm's results over a number of accounting periods as well as with other business enterprises. IT IS TRUE. Ratios help comparisons with certain bench marks to assess as to whether firm’s performance is better or otherwise. For this purpose, the profitability, liquidity, solvency, etc., of a business, may be compared: (i) over a number of accounting periods with itself (Intra-firm Comparison/Time Series Analysis), (ii) with other business enterprises (Inter-firm Comparison/Cross-sectional Analysis) and (iii) with standards set for that firm/industry (comparison with standard (or industry expectations).