Match List-I with List-II. LIST I LIST II (A) Liquidity Ratio (I) Inv…

Match List-I with List-II.

LIST I	LIST II
(A) Liquidity Ratio	(I) Inventory Turnover ratio
(B) Solvency Ratio	(II) Quick Ratio
(C) Activity (or Turnover) Ratio	(III) Price earning ratio
(D) Profitability Ratio	(IV) Total asset to debt ratio

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (A)-(II), (B)-(IV), (C)-(I), (D)-(III)

Ratios are grouped by what they measure: short-term paying capacity (liquidity), long-term paying capacity (solvency), efficiency in using resources (activity or turnover) and earning capacity (profitability).

(A) Liquidity Ratio — this matches (II) Quick Ratio. The quick (acid-test) ratio compares quick assets with current liabilities, a test of short-term solvency.

(B) Solvency Ratio — this matches (IV) Total asset to debt ratio. It shows how far long-term debt is covered by total assets, a measure of long-term safety for lenders.

(C) Activity (or Turnover) Ratio — this matches (I) Inventory Turnover ratio. It shows how quickly inventory is converted into sales, a measure of efficiency.

(D) Profitability Ratio — this matches (III) Price earning ratio. It relates the market price of a share to the earnings per share, so it is grouped with the profitability ratios.

NCERT (2026-27 edition):
Terms Introduced in the Chapter – “… Types of Ratios: There are many types of ratios, viz., liquidity, solvency, activity and profitability ratios. The liquidity ratios include current ratio and acid test ratio. Solvency ratios are calculated to determine the ability of the business to service its debt in the long run instead of in the short run. They include debt equity ratio, total assets to debt ratio, proprietary ratio and interest coverage ratio.”

NCERT (2026-27 edition):
Terms Introduced in the Chapter – “… The turnover ratios basically exhibit the activity levels characterised by the capacity of the business to make more sales or turnover and include Inventory Turnover, Trade Receivables Turnover, Trade Payables Turnover, Working Capital Turnover, Fixed Assets Turnover and Current assets Turnover. Profitability ratios are calculated to analyse the earning capacity of the business which is the outcome of utilisation of resources employed in the business. The ratios include Gross Profit ratio, Operating ratio, Net Profit Ratio, Return on investment (Capital employed), Earnings per Share, Book Value per Share, Dividend per Share and Price/Earning ratio.”