On the basis of the following information, answer the question.
| Particulars | Amount (₹) |
| Share Capital: | |
| Equity share capital (₹10 each) | 12,00,000 |
| 12% Preference share capital | 3,00,000 |
| Reserves & Surplus | 5,00,000 |
| 10% Debentures | 12,00,000 |
| Current Liabilities | 3,00,000 |
| Fixed Assets | 28,00,000 |
| Current Assets | 7,00,000 |
| Net profit after tax as per Statement of Profit & Loss | 450000 |
| Tax | 150000 |
| Market Price of the Share | 34 |
To measure the short-term financial position.....................ratio can be calculated.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Current Ratio
The short-term financial position of a business is its ability to pay its current liabilities out of its current assets. Such ratios are called liquidity ratios, and the main one is the current ratio (current assets ÷ current liabilities).
Option (1) Gross Profit Ratio — Incorrect. It is a profitability ratio: gross profit compared with revenue from operations.
Option (2) Current Ratio — Correct. It compares current assets with current liabilities, so it measures short-term solvency.
Option (3) Total Assets to Debt Ratio — Incorrect. It is a solvency ratio that looks at long-term debt.
Option (4) Proprietary Ratio — Incorrect. It is a solvency ratio: shareholders’ funds compared with capital employed or total assets.
NCERT (2026-27 edition): |