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.
To measure the short-term financial position Current Ratio can be calculated.
Liquidity ratios are calculated to measure the short-term solvency of the business, i.e. the firm’s ability to meet its current obligations. These are analysed by looking at the amounts of current assets and current liabilities in the balance sheet. The two ratios included in this category are current ratio and liquidity ratio.
OTHER OPTIONS
- Gross Profit Ratio- Measures profitability of the company
- Total Assets to Debt Ratio- Measures long term solvency position of the company
- Proprietary Ratio- Measures long term solvency position of the company