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Home Questions FSKVBXHEJF
Target Exam

CUET

Subject

Business Studies

Chapter

Controlling

Question:

Match the following:

1. Liquidity ratio A. Analyse profits in relation to sales
2. Solvency ratio B. Efficiency of operations
3. Profitability ratio C. Short-term solvency of business
4. Turnover ratio D. Long-term solvency of business
Options:

1-A, 2-C, 3-D, 4-B

1-C, 2-D, 3-A, 4-B

1-D, 2-C, 3-A, 4-B

1-D, 2-C, 3-B, 4-A

Correct Answer:

1-C, 2-D, 3-A, 4-B

Explanation:

Liquidity ratio:  Liquidity ratios are calculated to determine short-term solvency of business. Analysis of current position of liquid funds determines the ability of the business to pay the amount due to its stakeholders

Solvency ratio: Ratios which are calculated to determine the long-term solvency of business are known as solvency ratios. Thus, these ratios determine the ability of a business to service its indebtedness.

Profitability ratio: These ratios are calculated to analyze the profitability position of a business. Such ratios involve analysis of profits in relation to sales or funds or capital employed.

Turnover ratio: Turnover ratios are calculated to determine the efficiency of operations based on effective utilization of resources. Higher turnover means better utilization of resources.

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