Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

Identify which of the following are normally computed to identify the liquidity of the Business?

(A) Proprietary Ratio
(B) Interest Coverage Ratio
(C) Quick Ratio
(D) Debt Equity Ratio
(E) Current Ratio

Choose the correct answer from the options given below:

Options:

(C) and (E) only

(A), (C) and (E) only

(A), (B) and (C) only

(B), (D) and (E) only

Correct Answer:

(C) and (E) only

Explanation:

Liquidity ratios serve as tools for assessing a business's immediate financial stability – specifically, its capability to fulfill present commitments. This evaluation hinges on scrutinizing the quantities of current assets and current liabilities detailed within the balance sheet. The pair of ratios falling under this classification encompass the current ratio and the liquid ratio.